The production value of Taiwan’s manufacturing sector is expected to contract 7.36 percent on an annual basis this year as demand from China slows, the Industrial Economics and Knowledge Center (IEK) said yesterday.
The decline would be the steepest since the global financial crisis in 2009 and the forecast is far greater than the 1.74 percent decline IEK projected in August.
“China’s economic weakness has afflicted its global trade partners, especially Taiwan, South Korea and Southeast Asian countries,” IEK senior researcher Peter Chen (陳志強) told a news conference.
Photo: Wang Meng-lun, Taipei Times
China on Monday reported 6.9 percent annual growth in GDP for last quarter, dipping below 7 percent for the first time in six years.
IEK expects Taiwan’s manufacturing sector’s output to expand just 0.87 percent from an estimated NT$17.59 trillion (US$540.26 billion) this year to NT$17.75 trillion next year.
“As Taiwan is overly dependent on China, we do not expect a V-shaped recovery,” Chen said. “The growth next year will mainly come from the US and Europe as the economies stabilize.”
Chen said that the local manufacturing sector would be unlikely to return to growth until the second quarter of next year, while the nation needs to solve a long-term problem of upgrading its industry structure to higher-margin businesses.
The production value of information technology hardware, a major pillar of Taiwan’s economy, is expected to grow 1.9 percent next year to NT$6.1 trillion, an improvement from an estimated 0.6 percent contraction this year, Chen said.
However, production value of the basic metal and machinery segment, the second-biggest contributor to manufacturing output, is expected to shrink by 2.2 percent to NT$4.61 trillion next year, compared with this year’s 9.2 percent decline, IEK said.
The center blamed steel overcapacity in China for the slow recovery of the basic and machinery segment, and industry players agree.
“The machine tool industry’s outlook is bleak. We expect the decline to exceed IEK’s forecast in the fourth quarter and the whole year of this year,”said Carl Huang (黃建中), secretary-general of the Taichung-based Taiwan Machine Tool and Accessory Builder’s Association.
“We do not expect to see a significant improvement until the third quarter of next year,” Huang said.
China is the biggest export destination for Taiwanese machinery goods, receiving more than 30 percent of the sector’s overseas shipments.
The production value of the machinery tool sector is expected to drop by 10.4 percent to NT$135.2 billion this year and decline by another 2.1 percent next year to NT$132.5 billion, IEK said.
The petrochemical sector is expected to see growth in production value of 3 percent annually to NT$4.61 trillion next year, reversing an annual decline of 16.7 percent this year, thanks to steady global crude oil prices, the center’s data showed.
Taiwan’s industry, including tourism, is expected to be flat in terms of production value next year due to the sluggish economy.
IEK forecast that the industry’s production value could rise 0.6 percent to NT$2.43 trillion next year after growing 0.5 percent this year.
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