Mon, Mar 09, 2009 page12

• Rate of export decline slowed last month

  HOLIDAY EFFECT Analysts say part of the reason export decline slowed down is because the Lunar New affected exports in February last year, but not this year

  • By Crystal Hsu / STAFF REPORTER
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  The annual decline in exports may have slowed last month thanks to a lower base last year and recent rush orders, but trade data could indicate the economy was weaker than expected in the first quarter, economists said.

  Exports, which account for the lion’s share of GDP, are expected to have contracted between 20 percent and 25 percent last month after plunging a historical 44.1 percent in January, analysts forecast, attributing the deceleration to a lower comparison bar last year.

  Tony Phoo (符銘財), a Taipei-based economist at Standard Chartered Bank, predicted that outbound shipments declined 25.2 percent last month from the same period last year, which was broken by the Lunar New Year holiday.

  “It is better to combine the data of January and February to make a fair comparison,” Phoo said by telephone. “Foreign sales may have dropped 35.7 percent year-on-year after factoring in the holiday effect.”

  The economist said the pace of decline could have slowed, but the data still pointed to a serious contraction, signifying a tough first quarter. The Ministry of Finance is due to unveil trade figures for last month this afternoon.

  Cheng Cheng-mount (鄭貞茂), head economist at Citigroup Taiwan Inc, estimated in a client note that exports could have slumped 20.6 percent year-on-year last month, while imports were down 31.1 percent.

  “We expect both exports and imports to decline to a lesser degree in February,” Cheng said in the note. “More working days and some rush orders likely contributed to the improvement.”

  Cheng predicted the nation could manage to post a trade surplus of US$3 billion, from US$3.5 billion a month earlier, owing to a sharper deterioration in imports.

  Cheng, normally an optimist compared with his counterparts, said that trade and other data showed the contraction was deeper in the first quarter than in the fourth quarter of last year, when the economy shrank by a record 8.36 percent.

  The government forecast that GDP would weaken by 6.51 percent in the first three months, dragged down by a whopping 41 percent decline in exports.

  Both Cheng and Phoo said the central bank would cut the interest rate by 12.5 basis points in its regular board meeting on March 26 in a sustained but symbolic effort to stimulate private investment and consumption. The monetary regulator has brought the re-discount rate down from 3.625 percent last September to the present 1.25 percent in seven cuts.

  Other analysts, however, said the central bank would leave the rate untouched this month to save the measure for a worse release of economic data later this year.

  Polaris Research Institute (寶華綜合經濟研究院) president Liang Kuo-yuan (梁國源) said exports would remain dismal despite the drop in economic deceleration for holiday reasons. Against this backdrop, Liang said the central bank should keep the rate unchanged and make another cut when the government unveils first-quarter performance figures in May.

  “The room for monetary maneuvers is getting smaller and smaller,” Liang said by telephone. “The central bank is aware of it and wants to flex its muscles very cautiously.”

  Kevin Hsiao (蕭正義), head of UBS Wealth Management Research in Taiwan, agreed that the central bank would approach the rate cut more conservatively unless export data turns out worse than expected.

  “The scenario [worsening exports] is unlikely, considering the holiday effect and rush orders” Hsiao said. “The first-quarter data will be more likely to motivate the central bank to lower rates.”
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