The Taiwanese Economy in March 2023

After observing recent domestic and international economic situations, it can be seen that while the previous bank crisis in the US and Europe has been controlled, the effects of tightening monetary policies are gradually fermenting. This has caused a significant slowdown in manufacturing activities in various countries, leading to an increase in financial risk and a global economic slowdown. In terms of domestic conditions, due to an increase in working days in March compared to the previous month, the manufacturing industry’s exports, production index, and export orders have all increased. As a result, the proportion of manufacturers who are optimistic about the current month’s economic performance is significantly higher than those who are pessimistic. The service industry is benefiting from the gradual return of consumer traffic and the impressive performance of the stock market, which is helping the catering and finance-related service industries to be optimistic about their current month’s economic performance. However, the construction industry has been affected by the continued slowdown in factory construction progress and the uncertain economic prospects, causing both buyers and sellers to be unable to hold an optimistic view of the domestic property market in the next six months.
Therefore, based on the results of the survey, the business composite indicator for the manufacturing and service industries continued to rise in March. Regarding the updated overall economic forecast by the Taiwan Institute of Economic Research (TIER), the global economic slowdown has weakened the consumer momentum in end markets, and the industry chain continues to adjust inventory. The growth momentum of construction project investment is weak, and both import and export orders in the first quarter have experienced double-digit declines. This slowdown in export momentum also affects investment growth. Therefore, this forecast has revised downwards the private investment and import and export performance. Overall, it is expected that Taiwan’s economy will show a lukewarm internal temperature and a cold external environment this year. TIER predicts that the domestic economic growth rate in 2023 will be 2.31%, a downward revision of 0.27 percentage points from the January 2023 forecast.
In terms of foreign trade, due to the still weak global economic demand, Taiwan’s exports in March 2023 decreased significantly by 19.07% compared with the same month of 2022, the consecutive seven-month decrease. Regarding imports, Taiwan’s imports in March 2023 decreased by 20.08% compared with imports in March of 2022. Taiwan’s exports and imports from the beginning of this year till the end of March 2023 gave a trade surplus of US$ 8.918 billion or decreased by 42.25% year-on-year.
Taiwan’s consumer price index (CPI) increased by 2.35% in March 2023 compared with the same month of previous year, which would be 0.08 percentage points lower than the inflation rate of previous month. The core inflation rate excluding prices of the energy and food increased by 2.55% in March 2023, which would be 0.01 percentage points higher than the core inflation rate in February 2023. In addition, the producer price index (PPI) increased by 0.52% in March 2023 on the year-on-year basis, which would be 3.45 percentage points lower than the previous month caused by the fact that the global commodity prices and shipping costs have been recently dropping.
As for exchange rate, the NTD went stronger due to the relative trend of USD exchange rate in March 2023. The NTD/USD stood at 30.454 in late March 2023, indicating a 0.09% appreciation. Regarding the over-night call rate; the lowest and highest rate in March 2023 stood at 0.555% and 0.761% respectively with respect to the recent monetary policy by the central bank of Taiwan.

Business Survey Outcomes

The portion of manufacturing firms who perceived business were better than expected in the target month was 33.7% or increased by 0.4 percentage points compared with respondents who perceiving better business in the previous month. The portion of those perceived business were getting worse in the target month was 19.1% or decreased by 6.8 percentage points than 25.9% of respondents perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 47.2% or increased by 6.5 percentage points than the ratio of previous month’s respondents perceiving constant business. Overall, manufacturing firms perceived the business in the target month was more optimistic compared with the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 26.1% in the target month or decreased by 11.3 percentage points than 37.4% of respondents feeling more optimistic about the near future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 23.8% or increased by 8.0 percentage points compared with 15.8% of respondents feeling rather pessimistic about the near future in the previous month. The portion of manufacturing firms who perceived business remained constant in the next six months stood at 50.1% or increased by 3.3 percentage points compared with 46.8% of respondents feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was also more neutral and somewhat pessimistic compared with the previous month.
As a result, the manufacturing composite indicator for March 2023 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 91.71 points in February 2023 moved up to 93.95 points in March 2023. Figure 1 shows an increase of 2.24 points.
Moreover, the TIER service sector composite indicator for March 2023 on moving average also saw an upward correlation, and from a revision of as 95.23 points in February 2023 moved up to 96.75 points in March 2023. Figure 1 shows an increase of 1.52 points.
In addition, the TIER construction sector composite Indicator for March 2023 adjusted for the seasonal factors on moving average saw a downward correlation, and from a revision of 93.27 points in February 2023 went down to 91.25 points in March 2023. Figure 1 shows a decrease of 2.02 points.

Analyses and Outlook of Industries

Following are manufacturers' sentiments that are industry-specific in the monthly TIER surveys:

● Manufacturers’ sentiments that have been in decline in the March survey and are expected to deteriorate over the next six months include:
Textiles Mills, Fabric Mills , Leather, Fur and Allied Product Manufacturing, Wood and Bamboo Products Manufacturing, Man-made Fibers Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Bicycles Manufacturing, Bicycles Parts Manufacturing.

● Manufacturers’ sentiments that have been in decline in the March survey, but are expected to improve over the next six months include:
Electronic Parts and Components Manufacturing.

● Manufacturers’ sentiments that have been in decline in the March survey and are expected to remain sluggish over the next six months include:
None.

● Manufacturers surveyed who felt the March outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Yarn Spinning Mills, Motorcycles Parts Manufacturing, Basic Civil Structure Construction.

● Manufacturers surveyed who felt the March outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Paper Manufacturing, Printing, Electric Wires and Cables Manufacturing, Precision Instruments Manufacturing, Restaurants and Hotels.

● Manufacturers surveyed who felt the March outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Slaughtering, Prepared Animal Feeds Manufacturing, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Industrial Chemicals, Petrochemicals Manufacturing, Petroleum and Coal Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Electronic Machinery, Education and Entertainment Articles Manufacturing, Construction, Real Estate Investment, Transportation and Storage.

● Manufacturers’ sentiments that have improved in the March survey and is expected to deteriorate over the next six months include:
None.

● Manufacturers’ sentiments that have improved in the March survey and is expected to remain upbeat over the next six months include:
Food, Frozen Food Manufacturing, Edible Oil Manufacturing, Flour Milling and Grain Husking , Soft Drink Manufacturing , Plastics and Rubber Raw Materials, Glass and Glass Products Manufacturing, Metal Structure and Architectural Components Manufacturing, Audio and Video Electronic Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Motorcycles Manufacturing, Retail Sales, Wholesale, Banks, Securities, Insurance, Telecommunication Services.

TIER Forecast (issued on 25th March, 2023.)
(NT$100 million, Chained (2016) Dollars)