Last week, Quanta Computer Inc’s decision to trim its workforce at its Taoyuan production facility, along with local media reports that some high-tech companies in the Hsinchu Science Park have also been considering recruitment freezes, indicated that the business climate in Taiwan’s tech sector has turned significantly weaker in the second half of the year, which is the traditional high season for electronics.
This is a worrisome sign for Taiwan because it showed that worsening debt problems in the eurozone and weakening economic growth in the US have not only hit the local tech sector’s outbound shipments, but would also have an impact on the domestic labor market.
Economic data released last week provided more reasons for concern about the nation’s export--oriented economy. The Ministry of Economic Affairs on Tuesday said that export orders increased 5.26 percent year-on-year last month to US$36.71 billion — much slower than the 11.12 percent rise in July and the slowest in nearly 22 months.
The latest export order data showed a general moderation in demand for Taiwan’s overseas shipments over the next one to three months from the nation’s major export markets, excluding the six ASEAN countries.
A closer look at the data revealed that substantially slowing demand for orders for Taiwan’s major tech goods — electronic components, precision machinery, and information and communications products — has alarming implications for GDP growth in the fourth quarter, not to mention the whole year.
Given the increasing downside risks to the global economy, the IMF — in its biannual World Economic Outlook report released on Tuesday — revised downward its GDP growth forecast for Taiwan from 5.4 percent to 5.2 percent for this year, and from 5.2 percent to 5 percent for next year, after it cut growth forecasts for the global economy to 4 percent for this year and next year, from 4.3 and 4.5 percent respectively.
While most government officials still emphasized that the nation’s economic fundamentals were in good shape, no one can deny that Taiwan is certain to be influenced by eurozone and US economic woes.
Pointing to the slowing growth in export orders last month, the continued slowing growth in imports since April and the IMF’s slashing of GDP growth forecasts for Taiwan this year and next year, Council of Economic Planning and Development Minister Christina Liu (劉憶如) on Wednesday warned that Taiwan is facing growing headwinds through the end of next year.
The latest unemployment rate figure released by the Directorate-General of Budget, Accounting and Statistics on Thursday came as no surprise, as it rose for the third straight month to 4.45 percent last month as college graduates entered the labor market. An obvious concern, however, is the slow hiring in tech manufacturing and trade sectors, which reflected producers’ downbeat outlook and might lead to more postponing of capital spending and recruitment into next year, Standard Chartered Bank economist Tony Phoo (符銘財) has said.
Then, on Friday, the ministry’s industrial production data showed last month’s output rose 3.88 percent year-on-year, which was not only a sharp drop from the double-digit growth seen early this year, but also provided more evidence that external uncertainties are weighing on domestic manufacturers.
Against this backdrop, stock market investors foresee bigger challenges ahead. The benchmark TAIEX has plunged 21.47 percent since the beginning of this year after the recent global market rout pushed the index to a nearly two-year low on Friday. No one knows when the market will bottom out; what we do know is that the government has no other options but to boost domestic consumption and investment, or the public will have to be prepared for hardship.
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