May 2023  
Global economic conditions are far from being out of the woods
Under the global uncertainties, manufacturing and service composite indicators issued by TIER declined
The US debt ceiling negotiations are still ongoing. Although the risk of U.S. government debt default is low, it will still cause increased turmoil in global financial markets. In addition, although China’s exports, total retail sales of consumer goods, and industrial added value in April still showed good performance in positive growth, China’s imports, real estate market, youth unemployment rate, new bank loans, and price data were not as expected; showing that China’s economic recovery is still unbalanced. In terms of domestic manufacturing, due to weakening terminal demand, China’s post-pandemic demand has been not as good as expected, and manufacturers continue to destock; therefore, Taiwan’s export and export orders and production performance in April were still weak. Taiwan’s service industry on the other hand has benefited from the lifting of mask order, and the return of consumers has made retailers rather optimistic about the economic performance of the month. However, due to the challenge of US regional banks facing the loss of deposits and shrinking asset values, and the US Treasury Secretary’s warning on the debt ceiling issue, the financial market was turbulent, and Taiwan’s financial-related businesses were pessimistic about the economic performance of the month as a result. Regarding Taiwan’s construction industry, the construction industry is optimistic about the economic performance in the next six months, because the Taiwan government has expanded its construction efforts. Based on the results of the survey, the business composite indicator for the manufacturing and service industries issued by the Taiwan Institute of Economic Research (TIER) declined in April 2023. ...Read more
Taiwan cuts 2023 growth prediction to 2.04%
The economy will grow by 2.04% in 2023 instead of by 2.12% as predicted earlier, the government said Friday (May 26th 2023). Taiwan has been hoping to keep gross domestic product (GDP) growth above 2% for the year, but falling exports and a worse-than-expected investment performance have led to cuts in forecasts by major think tanks. The Cabinet’s Directorate General of Budget, Accounting and Statistics (DGBAS) said growth in 2023 would fall to its lowest level in eight years after GDP shrunk by 2.87% during the first quarter. Global demand is still taking a beating due to the war in Ukraine, inflation, and interest rate hikes. As to private investment, sectors including green energy, semiconductors, and airlines are continuing to expand amid a post-COVID recovery. However, other parts of the economy have to cope with excess stocks, forcing them to cut the pace of production and be more careful about spending. As a result, private investment is likely to shrink by 2.49% this year, or 1.36% more than expected, the DGBAS said. In contrast, private consumption would surge by 6.92%, 1.68% more than forecast earlier, and inflation for the year would reach 2.26%, 0.1% higher than previous predictions by the DGBAS (Source: Taiwan News).

Taiwan's economy stays in contraction for 6th straight month in April (Source: Focus Taiwan).
Taiwan AI to be showcased at trade fair (Source: Taipei Times).
Taiwan Economic Research Monthly
Incomplete Theory Makes Monetary Policy Excessively Expected
In 2022, Nouriel Roubini, an economist at New York University, believed that this tightening policy would be suspended due to problems in important financial institutions. In March 2023, the bankruptcy of Silicon Valley Bank and many problems in other financial institutions broke out. Although the US Federal Reserve and Taiwan’s central bank continue to raise or tighten interest rates, the huge financial support for those institutions that have problems is actually a loose policy. Over the years, financial crises and monetary policy tightening have occurred in turn, which even makes people suspect that monetary policy is the cause or boost of large economic fluctuations. The possibility that monetary policy aimed at stabilizing the economy will cause economic fluctuations has long been pointed out by scholars such as Milton Friedman, and one of the reasons why monetary policy may continue to cause fluctuations is the economic and monetary theory that oversimplifies and exaggerates the effectiveness of monetary policy.
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