The Taiwanese Economy in March 2020
International institutes including the International Monetary Fund,
IHS Markit, and Economist Intelligence Unit have all adjusted their
forecasts for this year significantly downward due to the outbreak
and severe impacts of COVID-19. As Taiwan and global economy are
highly correlated, all three composite indicators issued by the
Taiwan Institute of Economic Research (TIER) continue to decline.
However, fixed capital formation is deemed as the key engine driving
Taiwan's economic growth and mitigating the impacts on consumption
and exports. For that reason, TIER forecast Taiwan's economy to
grow by 1.58%, 1.09 percentage points less than its previous forecast.
Taiwan's exports in March 2020 decreased by 0.65% compared with
the same month of 2019 in spite of a strong market demand for ICT
parts and components. Regarding imports, Taiwan's imports in March
2020 only increased by 0.49% compared with imports in March of 2019
due to the continuously dipping crude oil prices.
Taiwan's consumer price index (CPI) decreased by 0.01% in March
2020 compared with the same month of previous year due to the decreasing
global crude oil prices. The core inflation rate excluding prices
of the energy and food dropped by 0.36% in March 2020. In addition,
the wholesale price index (WPI) decreased by 7.32% in March 2020
on the year-on-year basis due to the fact that commodity prices
dropped continuously.
As for exchange rate, the NTD similar to all other major currencies
in the world went somewhat stronger due to the relatively weaker
USD with respect to the Fed's looser monetary policies. The NTD/USD
stood at 30.254 in late March 2020 indicating a 0.25% appreciation.
Regarding the interest rate, it remained low and steady in March
2020 due to the continued loose monetary operations by the CBC with
respect to the most recent CPI reading; the lowest and highest over-night
call rate in March 2020 stood at 0.076% and 0.180% respectively.
Business Outlook
The portion of manufacturing firms who perceived business were
better than expected in the target month was 26.6% or increased
by 10.9 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 36.9% or decreased
by 11.9 percentage points than 48.89% perceiving worse business
of the previous month. The portion of manufacturing firms who perceived
business remained constant in the target month was 36.5% or increased
by 1.0 percentage points compared with 35.5% perceiving constant
business in the previous month. Overall, manufacturing firms perceived
the business in the target month was somewhat optimistic than the
previous month.
In addition, the portion of manufacturers who perceived business
would be better in the next six months was 16.7% in the target month
or decreased by 3.5 percentage points than 20.2% feeling more optimistic
about the future in the previous month. The portion of firms who
perceived the economic outlook would be worsening was 39.7% or increased
also by 3.5 percentage points compared with 36.2% feeling rather
pessimistic about the future in the previous month. The portion
of manufacturing firms who perceived business remained constant
in the next six months stood at 43.6%, and the reading remained
the same as manufacturers feeling neutral about the business outlook
one month earlier. Overall, manufacturing firms perceived the business
in the near future was less optimistic compared with the previous
month due to the uncertain impacts of COVID-19.
The manufacturing composite indicator for March 2020 adjusted for
seasonal factors on moving average, saw a downward correction, and
from a revision of as 88.83 points in February 2020 moved down to
82.35 points. Figure 1 shows a decrease of 6.48 points, the third-month
consecutive dip.
The TIER service sector composite indicator for March 2020 adjusted
for seasonal factors on moving average saw a downward correlation,
and from a revision of as 85.63 points in February 2020 moved down
to 82.19 points. Figure 1 shows a decrease of 3.44 points, the third-month
consecutive decline.
In addition, the TIER Construction Sector Composite Indicator for
the seasonal factors on moving average also saw a downward correlation,
and from a revision of 89.78 points in February 2020 went down to
85.79 points. Figure 1 shows a decrease of 3.99 points, the third-month
consecutive decline as well.
Forecast on Individual 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:
Wood and Bamboo Products Manufacturing, Printing, Industrial Chemicals,
Petrochemicals Manufacturing, Petroleum and Coal Products Manufacturing,
Machinery and Equipment Manufacturing and Repairing, Cutlery and
Tools Manufacturing, Industrial Machinery, Restaurants and Hotels,
Banks, Securities, Insurance, Telecommunication Services.
● Manufacturers' sentiments that have been in decline in the March
survey, but are expected to improve over the next six months include:
None.
● Manufacturers' sentiments that have been in decline in the March
survey and are expected to remain sluggish over the next six months
include:
Textiles Mills, Yarn Spinning Mills, Transportation and Storage.
● 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:
Paper Manufacturing, Iron and Steel Basic Industries, Fabricated
Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing,
Metal Structure and Architectural Components Manufacturing, Communications
Equipment and Apparatus Manufacturing, Transport Equipment Manufacturing
and Repairing, Motor Vehicles Manufacturing, Motor Parts Manufacturing,
Bicycles Manufacturing, Bicycles Parts Manufacturing, Education
and Entertainment Articles Manufacturing.
● 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:
Food, Frozen Food Manufacturing, Edible Oil Manufacturing, Flour
Milling and Grain Husking .
● 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, Soft Drink Manufacturing , Fabric Mills , Apparel,
Clothing Accessories and Other Textile Product Manufacturing, Leather,
Fur and Allied Product Manufacturing, Electrical Machinery, Electrical
Machinery, Supplies Manufacturing and Repairing, Electric Wires
and Cables Manufacturing, Electronic Machinery, Precision Instruments
Manufacturing, Construction, Basic Civil Structure Construction,
Retail Sales.
● Manufacturers' sentiments that have improved in the March survey
and is expected to deteriorate over the next six months include:
Plastics and Rubber Raw Materials, Rubber Products Manufacturing,
Non-metallic Mineral Products Manufacturing, Porcelain and Ceramic
Products Manufacturing, Glass and Glass Products Manufacturing,
Audio and Video Electronic Products Manufacturing, Data Storage
Media Units Manufacturing and Reproducing, Real Estate Investment.
● Manufacturers' sentiments that have improved in the March survey
and is expected to remain upbeat over the next six months include:
None.
● Manufacturers' sentiments that have improved in the March survey
and the trend is expected to continue for the next six months include:
Slaughtering, Prepared Animal Feeds Manufacturing, Chemical Products
Manufacturing, Plastic Products Manufacturing, Cement and Cement
Products Manufacturing, Electrical Appliances and Housewares Manufacturing,
Electronic Parts and Components Manufacturing, Motorcycles Manufacturing,
Motorcycles Parts Manufacturing, Wholesale.
TIER Forecast (issued on 24th April, 2020.)
(NT$100 million, Chained (2016) Dollars)
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