Subprime woes in US pull down Taiwan's exports

"The slowdown is just beginning to unfold and will gradually affect the demand in the emerging markets."

Tony Phoo, Standard Chartered Bank economist

Exports the US last month began to show signs of slowing as a result of the US subprime crisis, a Finance Ministry official said yesterday.

"Taiwan's exports to the US declined by 1 percent in January, mainly because of a slowdown in demand as a result of the subprime crisis in the US market," said Hsu Ray-lin (許瑞琳), deputy statistician at the ministry.

Exports 11.9 percent year-on-year to US$22.14 billion last month, while imports increased by 14.8 percent to US$20.61 billion, Ministry of Finance statistics showed.

The trade surplus fell 16.5 percent to US$1.53 billion as import growth outpaced that of exports, Hsu said.

Hsu that strong growth in imports of durable goods was a good sign that the economy is healthy and still expanding. Imports of electrical machinery and precision machinery increased by 56.4 percent and 39.6 percent respectively.

Although Taiwan continued to enjoy stable growth in exports to ASEAN countries, China and Hong Kong and Europe, the pace was slower than in December.

Taiwan 14.6 percent and 19.3 percent growth in exports to China and ASEAN countries respectively, while exports to Europe increased by 7 percent.

Exports the Middle East saw a triple-digit increase last month.

Hsu that the strong demand in emerging markets would hopefully offset the decline in the US market.

"The slowdown is just beginning to unfold and will gradually affect the demand in the emerging markets," Standard Chartered Bank economist Tony Phoo (符銘財) said. "We expect the growth in exports to slow to a single digit figure in March and in the second half there may be a decline."

He said an unexpected drop in the US Institute of Supply Management services sector index indicated that the subprime crisis had expanded and caused the sector to shrink.

Hsu Kuo-an (徐國安), a Capital Securities (群益證券) analyst, said that the nation's export growth would likely be sluggish this month because of the Lunar New Year holidays.