Taiwan’s economy lost steam again last month after exports shrank 4.4 percent month-on-month to US$35.3 billion, data released on Wednesday by the Ministry of Finance showed. That brought the nation’s exports up just 2.3 percent during the first seven months to US$175.74 billion from a year ago.
Ministry of Finance officials attributed the sluggish annual growth to China’s economic woes caused by overcapacity and a rise in wages. Exports to China, including Hong Kong, only climbed 3.1 percent year-on-year in the period from January to last month following a 0.9 percent annual decline last month.
Exports to the US and Europe also dropped at an annual rate of 1.1 percent and 6.9 percent respectively during the same period as sagging private consumption curtailed demand for smartphones and other communication devices made by Taiwanese firms.
The weakness in the New Taiwan dollar has lent some support to exports. The NT dollar depreciated 3.41 percent against the US dollar to NT$30.120 during the seven-month period.
Taiwan’s anemic export growth is likely to pave the way for the Director-General of Budget, Accounting and Statistics (DGBAS) on Friday to cut its GDP annual growth forecast from the its previous estimate of 2.4 percent annual growth this year.
The agency expected exports to expand nearly 3 percent year-on-year to US$309.7 billion this year.
As exports will still be the biggest driver of GDP, representing the equivalent of about 68 percent of the country’s economic output this year based on the
DGBAS’ projection, the government should help firms to export to new growth areas beyond China.
The ASEAN region could have the potential to prop up Taiwan’s exports and thereby its GDP growth, while economic growth in Taiwan’s major export destinations, including China, the US and Europe, is staggering. This is because the US Federal Reserve is widely expected to start scaling back its bond purchasing program, or quantitative easing policy, next month, which will slow US GDP growth this year.
Taiwan’s exports to six emerging countries, including Malaysia and five other ASEAN members, showed robust growth as reflected by an annual growth of 7.3 percent in exports to US$33.45 billion in the seven-month period ending on July 31.
That makes ASEAN countries Taiwan’s second-biggest export destination, surpassing the US, Europe and Japan.
In fact, ASEAN seized the No. 2 position in 2007, when exports to those countries grew at an annual rate of 16.7 percent, outpacing China’s 12.6 percent expansion based on the statistics compiled by the Ministry of Finance.
However, progress in joining the ASEAN bloc has long been stalled, with no recent updates from the government. Instead, it is taking a different approach by pushing for a new round of negotiations of the Economic Cooperation Framework Agreement with China, to further open up Taiwan’s service sector, even though the early benefits brought by the agreement fell short of expectations.
Although liberalization is a better way to boost trade and economy, some rules must be followed. Those rules include the old saying: “Do not put all your eggs in one basket.” Taiwan’s government should be looking for markets other than China, especially when that country’s growth is waning.