DBS Bank yesterday cut its GDP growth forecast for Taiwan this year to 0.9 percent, from the 1.4 percent it predicted earlier, saying the nation might have the slowest-growing economy among Asia’s newly industrialized economies for the second year running due to soft exports.
“The slump in exports is the main cause of Taiwan’s underperformance, and a turnaround seems unlikely in the short to medium term, as the Chinese economy is expected to follow an L-shaped growth trend” in the coming years, Singapore-based DBS Bank economist Ma Tieying (馬鐵英) said in a report.
Taiwan’s export-oriented economy will suffer further amid China’s slowdown because China and Hong Kong account for 40 percent of Taiwanese exports, Ma said.
Adding to concerns is that Taiwan is losing competitiveness in the Chinese market, the economist said, citing Taiwan’s fall in market share for China’s imports of chemicals from 11.4 percent in 2010 to 7.6 percent last year.
Taiwan’s share of China’s imports of plastics and rubbers also dropped, from 13.4 percent to 11 percent over the same period.
Also worrying is that Taiwan’s exports are highly dependent on the electronics sectors, with the combined share of electronic parts and components, information and communication products and precision instruments standing close to 50 percent, the economist said.
The global smartphone industry is slowing due to technology maturation, the lack of new innovation and increasing market saturation, Ma said. It remains in question whether Apple Inc’s upcoming iPhone 7 series can beat its existing models in terms of sales after the US technology titan reported its first year-on-year sales decline in the first quarter, Ma said.
The government has sought to ease the overconcentration by diversifying export markets and industrial composition.
It will take a long time to adjust the structure of exports and substantial changes are unlikely to materialize in the short run, Ma said.
The central bank might stimulate growth by cutting interest rates by 12.5 basis points later this month and in September, Ma said.
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