World Economy

S&P Cuts Taiwan Growth

S&P Cuts Taiwan Growth S&P Cuts Taiwan Growth

Standard & Poor’s Ratings Services, a US-based ratings agency, has lowered its forecast for Taiwan’s economic growth for 2016 to 1.8%, citing the impact from China’s slowing economy.

Its latest forecast for gross domestic product growth represented a downward revision from its previous estimate of a 2.1% rise, according to S&P, but the ratings agency appeared more upbeat than Taiwan’s government and some local economic think tanks, CNA reported.

The government has forecast the country’s economy will grow by only 1.47% in 2016, a downward revision from an earlier estimate of 2.32%.

Among the more cautious local think tanks, the Chung-Hua Institution for Economic Research anticipates Taiwan’s economy will grow only 1.36%, the Yuanta-Polaris Research Institute put its number at 1.42%, and the Taiwan Institute of Economic Research forecasts growth to be at 1.57%.

Chang Shu-ping, a vice president of Taiwan Ratings Corp., a local partner of S&P, said that a slowdown in China’s economy, the world’s second largest, has imposed adversary impact on the economic conditions in the entire Asia Pacific region, so Taiwan’s GDP growth forecast was revised down, accordingly.

Chang said that there has been some evidence emerging to show that although China is taking measures to restructure its economy, its efforts failed to impress the market.

In the first quarter of this year, China’s GDP grew 6.7% from a year earlier, slightly slower than a 6.8% increase recorded in the fourth quarter of last year. That’s also a slightly drop from 2015 as a whole when the Chinese economy grew by 6.9%, its slowest pace in 25 years.

  Industrial Production Down

Industrial production in Taiwan continued to register a year-on-year fall in March amid weak global demand, but the magnitude of the reduction moderated compared to previous months, according to the ministry of economic affairs.

Citing data, the MOEA said that the local industrial production index for March fell 3.57% from a year earlier, marking the 11th consecutive monthly decline.

However, the fall was the smallest since July 2015, when the index dropped 2.75% from a year earlier.

Major high-tech firms, including Taiwan Semiconductor Manufacturing Co., which operates a 12-inch wafer plant in southern Taiwan, witnessed a delay in their production caused by the 6.4 magnitude earthquake in early February.

In March, industrial production in the electronics component segment fell 4.02% from a year earlier, but rose 22.57% from a month earlier, the MOEA said. Among these manufacturers, integrated circuit suppliers posted a 6.02% year-on-year decline in industrial production, and flat panel manufacturers recorded a 13.31% year-on-year fall, the MOEA added.

At the same time, the computer/optoelectronics segment continued to feel the impact from slowing demand for smartphones and escalating competition. As a result, production in this sector fell 15.39% from a year earlier in March, while the machinery segment also posted a 13.67% year-on-year fall in production amid a global economic slowdown, the MOEA data showed.

The MOEA said that the year-on-year fall in Taiwan’s overall March industrial production was better than the ministry’s previous forecast of a 5-8% decline.

It added that it was possible for local industrial production to turn stable in May and return to growth in the third quarter of this year at the earliest.

As for the first quarter of this year, Taiwan’s industrial production fell 4.58% from a year earlier.

According to Taiwan’s Ministry of Finance, China served as the largest buyer of Taiwan’s goods, and in the first quarter of this year, Beijing accounted for 24.6% of Taipei’s total exports, and after including Hong Kong, the ratio rose to 37.7%.

S&P said that although China’s economic growth has affected the Asian Pacific region, GDP growth in the region as a whole for 2016 and 2017 will remain strong at 5.3% and 5.2%, respectively, outperforming the rest of the world.