The business climate and market sentiment often change rapidly, leaving investors with little time to catch their breath and reflect on exactly what’s going on.
Many investors were caught unaware by the unexpectedly slow growth of exports last month, which signaled that the nation’s economic growth was set to weaken in the second half of the year.
On Thursday, the Ministry of Finance reported that exports last month grew at a pace of 8 percent year-on-year to US$22.87 billion, which not only decelerated substantially from a 21.3 percent rise to US$24.35 billion in the prior month, but also ended 11 months of double-digit export growth since August last year.
With imports increasing 12.3 percent year-on-year last month to US$23.28 billion because of soaring oil prices, Taiwan reported a trade deficit of US$410 million last month — the nation’s first trade deficit since March 2006.
The latest external trade figures caught people off guard because the data came just as the prices of global crude oil dropped nearly 20 percent from a record US$147.27 per barrel on July 11 and as prices of several grain commodities dropped substantially in recent weeks, which somewhat soothed public concern at rising inflation.
The latest trade data showed an across-the-board weakness in Taiwan’s export performance. But, most importantly, slowing exports to China (Hong Kong included) last month — a 4 percent increase year-on-year last month following a 25.5 percent rise the previous month — confirmed that the global slowdown has begun to take a toll on China and has negatively affected the demand for Taiwanese goods from a country that is already our largest export destination.
The recent plunge in the value of the NT dollar against the US dollar — dropping by NT$0.683, or 2.25 percent, over the past nine consecutive sessions — demonstrated similar bearish sentiment in the foreign exchange market.
If this pessimistic mood continues, it is likely we will see the local currency weaken further, property markets turn more bearish and domestic consumption diminish, not to mention the prospect of more foreign capital being removed for high-yield investments elsewhere.
The central bank, which has been raising its benchmark interest rates to fight inflation for a consecutive 16 quarters since October 2004, could face the dilemma of choosing to continue to focus on inflation controls with more rate hikes or shift its focus to stimulating the economy via rate cuts.
On the one hand, inflation driven by rising import costs remains a concern because the latest government data show that the consumer price index (CPI) climbed 5.92 percent year-on-year last month, marking its highest level of growth since September 1994. Excluding volatile vegetables, aquatic products and energy prices, the core CPI growth rate also hit a nearly 12-year high of 4.06 percent last month, indicating that the pressure on consumer prices remained high.
On the other hand, Taiwan’s export-oriented electronics companies are likely to benefit from a falling NT dollar and that in turn will help boost the economy. But these companies’ gain from a favorable currency exchange could be offset by the downturn of the global economy in the next few months if energy and materials costs remain high.
The nation’s policymakers should move fast to boost domestic demand and consumption, as global economic difficulties will most likely continue well into next year and as economic optimism over improved cross-strait relations is fading fast.
Concerns that the US might abandon Taiwan are often overstated. While US President Donald Trump’s handling of Ukraine raised unease in Taiwan, it is crucial to recognize that Taiwan is not Ukraine. Under Trump, the US views Ukraine largely as a European problem, whereas the Indo-Pacific region remains its primary geopolitical focus. Taipei holds immense strategic value for Washington and is unlikely to be treated as a bargaining chip in US-China relations. Trump’s vision of “making America great again” would be directly undermined by any move to abandon Taiwan. Despite the rhetoric of “America First,” the Trump administration understands the necessity of
In an article published on this page on Tuesday, Kaohsiung-based journalist Julien Oeuillet wrote that “legions of people worldwide would care if a disaster occurred in South Korea or Japan, but the same people would not bat an eyelid if Taiwan disappeared.” That is quite a statement. We are constantly reading about the importance of Taiwan Semiconductor Manufacturing Co (TSMC), hailed in Taiwan as the nation’s “silicon shield” protecting it from hostile foreign forces such as the Chinese Communist Party (CCP), and so crucial to the global supply chain for semiconductors that its loss would cost the global economy US$1
US President Donald Trump’s challenge to domestic American economic-political priorities, and abroad to the global balance of power, are not a threat to the security of Taiwan. Trump’s success can go far to contain the real threat — the Chinese Communist Party’s (CCP) surge to hegemony — while offering expanded defensive opportunities for Taiwan. In a stunning affirmation of the CCP policy of “forceful reunification,” an obscene euphemism for the invasion of Taiwan and the destruction of its democracy, on March 13, 2024, the People’s Liberation Army’s (PLA) used Chinese social media platforms to show the first-time linkage of three new
Sasha B. Chhabra’s column (“Michelle Yeoh should no longer be welcome,” March 26, page 8) lamented an Instagram post by renowned actress Michelle Yeoh (楊紫瓊) about her recent visit to “Taipei, China.” It is Chhabra’s opinion that, in response to parroting Beijing’s propaganda about the status of Taiwan, Yeoh should be banned from entering this nation and her films cut off from funding by government-backed agencies, as well as disqualified from competing in the Golden Horse Awards. She and other celebrities, he wrote, must be made to understand “that there are consequences for their actions if they become political pawns of
RSS