The gap between Taiwan’s actual exports and export orders might continue to overshadow the country’s economic outlook in the short term, according to new research from Bank of America Merrill Lynch.
Government statistics show that Taiwan’s exports in October declined 1.5 percent from a year ago, after falling 7 percent year-on-year in September.
However, the sub-par export data, however, stand in clear contrast to stronger export order figures, which rose by 3.2 percent year-on-year in October and by 2 percent in September, led by a promising increase in orders from the US and Europe.
Export order figures reflect the result of a monthly export order survey of about 5,000 local firms. It is generally perceived as a leading indicator of potential export volume over the next one to three months.
WIDENING GAP
“We continue to believe that the near-term prospects for Taiwan’s exports may not be as bright as those of its neighbor exporters, while the gap between exports and export orders may continue to widen,” said Marcella Chow (周奐彤), a Hong Kong-based economist at Merrill Lynch.
“We expect [national] exports to grow at 3 percent to 5 percent next year, slightly better than our current 1.3 percent estimate for this year, but to remain below [the global] trend,” she wrote in a research note.
Even though export orders tend to move in tandem with actual exports, the ratio of Taiwan’s export value to order value dropped from 99 percent in 2000 to 68.3 percent last year, according to Merrill Lynch.
According to the most recent figures, more than 87.7 percent of the nation’s October export orders for information and communications products were for products manufactured overseas, while more than 51.6 percent of electronics orders were manufactured outside of Taiwan, according to the brokerage’s data.
ABOVE AVERAGE
Both of the October figures were above their five-year averages of 84 percent for overseas production of information and communications products and 49 percent for electronic products.
“Recall that if orders are manufactured outside Taiwan, they are no longer counted as Taiwanese exports,” Chow said.
EMPLOYMENT CONCERNS
“This does not bode well for the local employment market, as well as the overall economic condition, as exports are a key pillar of Taiwan’s economy, accounting for close to 70 percent of GDP,” she added.
Earlier this month, the Directorate-General of Budget, Accounting and Statistics (DGBAS), cut its economic growth forecast this year to 1.74 percent from an earlier estimate of 2.31 percent made in August, citing the slow pace of export growth.
Exports make up about 70 percent of the nation’s GDP, according to the agency’s data.
The agency predicted exports would expand just 0.44 percent this year from last year, but grow 3.07 percent next year from this year.
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