Taiwan is likely to have slipped into recession, as evidenced by a general slowdown in economic activity this and last quarter, driving the central bank on Thursday to cut interest rates in a bid to reverse the downturn, economists said yesterday.
The rate cut, the first in six years, may do little if companies shy away from investment and consumers tighten their belts, economists said.
“We are definitely in a recession, given sustained declines of economic data, though some may disagree about its definition,” Yuanta-Polaris Research Institute (元大寶華研究院) chairman Liang Kuo-yuan (梁國源) said by telephone.
The EU defines recession as two consecutive quarters of negative economic growth, as measured by the seasonal adjusted quarter-on-quarter figures for real GDP.
Taiwan already recorded a downturn of 6.56 percent last quarter in terms of the seasonally adjusted annual rate and is bound for further contraction this quarter, whether compared with last quarter or a year earlier, several research institutes have predicted.
That would signify a recession and suggest a need for stronger measures.
However, the Directorate-General of Budget, Accounting and Statistics (DGBAS) gauges the nation’s economic health by comparing current data with their levels in the previous year.
By that account, the shadow of recession is still escalating, especially if international crude prices fail to stabilize, hurting non-tech exports, despite an expected rebound in electronics shipments next quarter, Taiwan Institute of Economic Research (TIER, 台經院) economist Gordon Sun (孫明德) said.
The government’s forecast last month of 0.1 percent growth for this quarter looks increasingly unachievable, after latest data about exports, industrial production and commercial sales all fared worse than expected, a DGBAS official who declined to be named told the Taipei Times yesterday.
The official declined to elaborate, saying that the DGBAS will update its economic growth data for Taiwan at the end of next month.
Economists said interest rate cuts cannot spur private investment interest if the nation continues to concentrate on a few industries and export markets, given that global trade has slowed this year.
Exports account for 70 percent of Taiwan’s GDP — with 40 percent of the nation’s outbound shipments — mostly electronic devices — destined for China, according to government data.
“Monetary policy is no substitute for a structural reform if the government aims to reinvigorate the economy,” Liang said.
Local companies must actively tap Internet-linked business opportunities that promise higher added value, rather than struggle with low-margin business, he said.
KGI Securities Co (凱基證券) economist Andrew Tsai (蔡耀德) said the economy has sank into recession, if only technically, to which a rate cut of 12.5 basis points provides no remedy.
“A lack of investment opportunities drives up savings and lower borrowing costs cannot reverse the situation,” Tsai said.
A further rate cut would be counterproductive because it could send a negative message about the economy and deepen cautious sentiment, as happened when Wall Street stumbled after the US Federal Reserve left its rate unchanged last week, Tsai said.
The New Taiwan dollar is on the verge of overtaking the yuan as Asia’s best carry-trade target given its lower risk of interest-rate and currency volatility. A strategy of borrowing the New Taiwan dollar to invest in higher-yielding alternatives has generated the second-highest return over the past month among Asian currencies behind the yuan, based on the Sharpe ratio that measures risk-adjusted relative returns. The New Taiwan dollar may soon replace its Chinese peer as the region’s favored carry trade tool, analysts say, citing Beijing’s efforts to support the yuan that can create wild swings in borrowing costs. In contrast,
Nvidia Corp’s demand for advanced packaging from Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) remains strong though the kind of technology it needs is changing, Nvidia CEO Jensen Huang (黃仁勳) said yesterday, after he was asked whether the company was cutting orders. Nvidia’s most advanced artificial intelligence (AI) chip, Blackwell, consists of multiple chips glued together using a complex chip-on-wafer-on-substrate (CoWoS) advanced packaging technology offered by TSMC, Nvidia’s main contract chipmaker. “As we move into Blackwell, we will use largely CoWoS-L. Of course, we’re still manufacturing Hopper, and Hopper will use CowoS-S. We will also transition the CoWoS-S capacity to CoWos-L,” Huang said
Nvidia Corp CEO Jensen Huang (黃仁勳) is expected to miss the inauguration of US president-elect Donald Trump on Monday, bucking a trend among high-profile US technology leaders. Huang is visiting East Asia this week, as he typically does around the time of the Lunar New Year, a person familiar with the situation said. He has never previously attended a US presidential inauguration, said the person, who asked not to be identified, because the plans have not been announced. That makes Nvidia an exception among the most valuable technology companies, most of which are sending cofounders or CEOs to the event. That includes
INDUSTRY LEADER: TSMC aims to continue outperforming the industry’s growth and makes 2025 another strong growth year, chairman and CEO C.C. Wei says Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), a major chip supplier to Nvidia Corp and Apple Inc, yesterday said it aims to grow revenue by about 25 percent this year, driven by robust demand for artificial intelligence (AI) chips. That means TSMC would continue to outpace the foundry industry’s 10 percent annual growth this year based on the chipmaker’s estimate. The chipmaker expects revenue from AI-related chips to double this year, extending a three-fold increase last year. The growth would quicken over the next five years at a compound annual growth rate of 45 percent, fueled by strong demand for the high-performance computing
RSS