The Legislative Yuan on Friday passed the Executive Yuan’s special resilience budget, and while lawmakers reduced it to NT$544.7 billion (US$17.8 billion), slicing NT$5.3 billion out — mainly from the Ministry of National Defense, but also the labor and health ministries — they kept the Ministry of Economic Affairs’ NT$46 billion spending plan to provide financial support, enhance industry competitiveness and develop diversified markets intact.
The economic ministry’s proposal would allocate money to aid companies hit by US tariffs and international trade developments, such as reduced interest rates on trade financing, preferential export insurance premiums, enhanced guarantees on export loans and expanded loan support for micro, small and medium-sized enterprises. Funds would also be earmarked to boost industrial competitiveness by helping firms upgrade their technology, replace old equipment, secure foreign orders and diversify international markets, the ministry said.
To promptly address the needs of different sectors, especially small and medium-sized enterprises and traditional industries, the ministry on Friday launched a multiagency task force to visit affected companies and confer. It would also enhance firms’ operations with market analysis, financial management, procurement, supply chain management or human resources management, as well as help them integrate artificial intelligence (AI) in their operations, it said.
Many companies in traditional industries operate on thin margins and have posted weak export performance this year due to the trade disputes and tariffs, despite positive GDP news. The Directorate-General of Budget, Accounting and Statistics (DGBAS) on Wednesday said that the government might revise upward its GDP growth forecast for this year, after it in August upgraded its full-year growth forecast to 4.45 percent, from its 3.1 percent estimate in May. The Chung-Hua Institution for Economic Research on Friday raised its GDP growth forecast to 5.45 percent for this year, from 3.05 percent predicted in July.
The stronger-than-expected GDP growth forecast underscores the nation’s growing role in the global AI supply chain, with robust demand for high-end semiconductors and electronics, but the divergence between tech and traditional industries has further widened. DGBAS data showed that electronic components suppliers posted 29.6 hours of overtime in August, a 45-year high, but overtime in furniture, plastics, auto parts, base metal and textile sectors dropped by two to four hours from a year earlier.
The textile sector reported a 4,000-person reduction in employees, while the transportation sector reported 3,000 fewer workers, and the plastics, metal and auto parts sectors each reported a 2,000-person drop in their workforces. In contrast, hiring increased by 17,000 in the electronic components sector and 10,000 at suppliers of computers, electronics and optical components, DGBAS data showed. Overall, unemployment rose for a third consecutive month in August, reaching its highest in a year at 3.45 percent, with unemployment rising by 6,000 to 415,000, while the number of underemployed — those working fewer than 35 hours a week for economic reasons, but willing to work more — increased to 121,000, the highest this year.
The US’ “reciprocal” tariffs are starting to bite, as are the impacts of exchange rate fluctuations and pricing competition from overseas rivals due to overcapacity. Experience shows that the labor market does not reflect changes in the macroeconomic environment early, but it rapidly deteriorates as soon as the situation takes a sharp turn for the worse, be it the dotcom bubble or the 2008 financial crisis. Hopefully, the impacts of tariffs do not worsen, but the government needs to better prepare to avoid being caught off guard.
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