Taiwan’s exports plunged by more than expected in December, which might keep the trade-reliant economy in recession in the fourth quarter and could mean the central bank cuts interest rates again.
December exports were down 13.9% from a year earlier, an 11th straight decline, the finance ministry said. A Reuters poll forecast a 13.15% fall and November had a 16.9% slide.
Exports for 2015 fell 10.6%, the biggest annual drop since a 20.3% contraction in 2009, due to sluggish demand from China and other global markets. In 2014, exports jumped 2.7%, thanks to Apple Inc’s iPhone.
Trends in Taiwan’s exports are a gauge for global technology product demand.
Taiwan’s economy slipped into recession in the third quarter. The central bank cut interest rates in September and December.
“There is still no sign Taiwan’s economy will pick up into the first half of 2016,” Andrew Tsai, an economist of KGI Securities, Taipei, said before the data was released.
“With the global economy in such a tough situation, there is room for the central bank to slash the rate by 12.5 basis point each in Q1 and Q2.” Fourth-quarter gross domestic product data will be announced on Jan. 29. Taiwan is home to many suppliers that make components or assemble gadgets for global brands such as Apple.
Foxconn, which assembles most of the latest iPhones, will cut working hours over the week-long Lunar New Year holiday, a person familiar with the matter said last Wednesday, a rare move analysts interpreted as a sign of softening demand.
Monumental Task
Taiwan’s voters, angry at low salaries and unaffordable housing, are set to elect a new president - but the island’s flagging fortunes and a slowdown in China mean the winner will have a mountain to climb.
More than 20 deals with China have been signed since President Ma Ying-jeou took office in 2008 and Taiwan’s tourist industry has flourished under an eight-year rapprochement with Beijing as mainland visitors flock to the island.
But many voters feel warmer ties have benefited big business over ordinary people.
Analysts say Ma was dealt a tough hand, with the 2008 financial crisis, European debt problems and a China slowdown–all of which have been bad news for Taiwan’s export-driven economy.
The island’s key technology sector has suffered from weak demand, particularly as China seeks to create its own homegrown tech industry. There are rocketing housing prices, an ageing population and low birth-rate to deal with.
“For the past four years, Taiwan’s GDP growth averaged around 2.3% annually, but people’s average income rose merely 1%,” said Gordon Sun, head of the Macroeconomic Forecasting Center at the Taiwan Institute of Economic Research.
“The fruits of economic growth were not shared by the general public.” Taiwan has trimmed its growth forecast for 2016 to 2.32%, from an earlier 2.7%. One factor is a restrictive approach to outside investment, according to Sun. “(The government) should give top priority to the lifting of restrictions on investments by foreign and mainland companies, which have deterred the development of innovation,” he said.
