Taiwan downgrades economic outlook to ‘dim’ as Covid-19 outbreaks in mainland China, global inflation weaken demand

Taiwan’s National Development Commission says global economic and trade momentum is slowing, which may lower export performance

Taiwan is seen as a barometer for world consumption of manufactured exports, especially hi-tech hardware such as PCs and smartphones

3-MIN READ3-MIN

Taiwan’s budget and statistics office is forecasting 2.75 per cent economic growth next year after 3.06 per cent this year. Photo: AFP

Published: 7:00pm, 27 Dec 2022Updated: 9:39am, 28 Dec 2022

Taiwan lowered its economic outlook to the most dire setting possible on Tuesday due to global inflation, weakening demand and the impacts of the Covid-19 outbreaks in mainland China.

An index of business indicators received a composite score of 12 in November, down from 18 in October and 38 a year ago, the National Development Commission said in a statement. The commission issued a “blue light” based on the score, signalling a “dim” economy.

An index of “leading indicators” compiled by the commission also lost ground in November for a 13th straight month. The index covers export orders, imports of equipment for Taiwan’s signature semiconductor sector, trends in the stock market, net hiring and health of the manufacturing sector. Officials use leading indicators to forecast six months ahead.

“Looking to the future, in terms of exports, even though applications of new technology must continue … global economic and trade momentum is weakening, which may lower the country’s export performance,” the commission said in a statement.

Forecasts in Taiwan are seen as barometers for world consumption of manufactured exports, especially hi-tech hardware such as PCs, smartphones and their electronic components. Weak performance in early 2023 would signal a continuation of global issues from this year, such as high inflation, spillover from the war in Ukraine and economic fallout from strict pandemic controls in mainland China.

“Affected by the overall economic environment, the market demand has reduced orders, resulting in a decline in the global PC market in 2022,” said Chris Wei, an industry consultant with the Taipei-based Market Intelligence & Consulting Institute.

“In 2023, facing ongoing geopolitical risks and persistent global inflation, the global PC supply chain from brands and distributors to original design manufacturers are expected to continue to face the oversupply caused by aggressive expansion during the pandemic,” Wei said, referring to strong orders last year and in 2020 for telework gear. Sales of Taiwanese-made smartphones are expected to face headwinds in particular.