After growing by an estimated 2.62 percent this year, the nation’s economy is expected to expand 2.2 percent next year, as inventory levels for technology products remain low at home and abroad, boding well for Taiwanese firms in their supply chain, Yuanta-Polaris Research Institute (元大寶華綜經院) said yesterday.
“The global landscape looks fair in the coming 12 months, with low inflation and low inventory in the US and in Taiwan,” the Taipei-based think tank said, adding that the backdrop renders inventory adjustment unnecessary.
TOP PRODUCERS
This would be favorable to Taiwan, home to the world’s largest contract chipmakers, chip designers, and makers of camera lenses, casings, touch panels and other critical components used in smartphones, laptops, connected vehicles and Internet of Things applications.
However, investment flows to advanced economies bear watching, as 75 percent of US-based manufacturing executives said they expect advanced manufacturing to improve productivity and create more localized production, the institute said.
Autonomous robots, integrated computational materials engineering, digital manufacturing, the industrial Internet and 3D printing are among the technological tools likely to make the biggest impact, Yuanta-Polaris president Liang Kuo-yuan (梁國源) said.
A combination of these tools could help reduce production costs and squeeze the need for intermediate goods and services that drives Taiwan’s export-oriented economy, he said.
The changing economic context could provide companies with a solution that is more local than global and US President Donald Trump is facilitating the transformation with sweeping tax reforms, he said.
“The changes merit attention, but policymakers in Taiwan have yet to grasp the gravity of the issue,” Liang said.
BRAIN DRAIN
The academic is also worried about an ongoing brain drain, which he said might evolve into a serious problem as the global trend of digitalization grows.
Taiwan lags behind South Korea and China in its ability to retain or attract talented professionals, he said, citing a report by the World Economic Forum.
A lack of policy stability and certainty, especially regarding Taiwan’s relations with China, is not helping, Liang said, as cross-strait ties sit atop the list of concerns among Taiwanese executives in service sectors.
As for manufacturers, foreign-exchange risks carry the heaviest weight, followed by international crude and raw material prices, and labor costs, Liang said.
CURRENCY
The greenback’s depreciation this year caught global currency analysts off guard, he said.
“Hopefully, the next central bank governor can help keep the local currency stable, allowing companies to better plan their budgets,” Liang said.
Yuanta-Polaris expects the New Taiwan dollar to trade at an average of NT$29.98 against the US dollar next year.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to