Taiwanese firms expect growth to resume in the second half of the year, but profit margins would remain short of full recovery amid the COVID-19 pandemic, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
The worst of the pandemic’s effects are likely over and business would return to growth moving forward, the institute said in its semi-annual survey on the outlook for purchasing activity.
“The operating condition is to fare stronger in the second half, with the purchasing managers’ index [PMI] likely rising to 57.2 for manufacturers and 58.8 for service providers,” CIER president Chang Chuang-chang (張傳章) told a seminar in Taipei.
PMI data aim to gauge the health of the manufacturing industry, with scores larger than 50 indicating expansion and values below the threshold suggesting contraction.
The second half is normally the high sales season for consumer electronic products, with Taiwanese firms supplying chips, camera lenses, battery packs, touch screens and other critical components.
Despite the business upturn, companies across sectors are conservative about profit margin, which might weaken slightly to 49.6 compared with the first half, Chang said, citing the survey.
The rebound in demand appears not strong enough for firms to increase prices, said Taiwan Academy of Banking and Finance (金融研訓院) chairman Wu Chung-shu (吳中書), who is a former CIER president.
Technology brands generally have a cautious business approach for fear that COVID-19 infections and a US-China trade dispute might dampen sales, Wu said.
The virus outbreak sits atop the list of concerns among local manufacturers at 91.3 percent, followed by US-China trade frictions at 61.4 percent and foreign currency volatility at 53.8 percent, the survey showed.
Service firms assign more importance to cross-strait relations than foreign currency exchanges, it showed.
The economy might turn brighter next year, but the chance of a V-shaped recovery is slim, Wu said, adding that countries have improved their understanding of the virus, which explains why mortality rates are easing.
Still, the pandemic wreaked havoc on 78.4 percent of local companies, eroding their operations by 20 to 30 percent in the first six months from the same period last year, the survey showed.
Just over 20 percent of local manufacturers said that they benefited from the outbreak by gaining order transfers, while 11 percent reported negative and positive effects, it showed.
Downsides include revenue falls, price volatility, broken supply chains, delayed product launches, liquidity tightness and transportation disruptions, the survey showed.
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