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The Taiwanese Economy in December 2021
In January 2022, many well recognized international organizations issued their most recent forecasts for this year’s global GDP growth. The United Nation predicted that the world economy will grow by 4.0% in 2022. In addition, IHS Markit, Economist Intelligence Unit, and the World Bank believed that the global GDP growth would be standing at 4.2%, 4.0%, and 4.1% respectively for this year. Given the relatively high base effect of 2021, their economic forecasts can be considered as optimistic and the coming business conditions can be deemed as promising in spite of the potential impacts and threat caused by Omicron, as such COVID variant is believed by scientists as less severe compared with Delta. The Taiwan Institute od Economic Research (TIER) also issued its forecast for Taiwan’s economic growth in 2022 as at 4.10% with respect to Taiwan’s solid performance in both the external and internal market demands.
Taiwan’s exports in December 2021 increased significantly by 23.43% compared with the same month of 2020, the consecutive ten-month in double digit growth, as a result of a strong market demand for ICT parts and components and other merchandises in addition to much lower base effect due to the COVID-19 impacts. Regarding imports, Taiwan’s imports in December 2021 increased by 28.09% compared with imports in December of 2020, also the consecutive ten-month in double digit growth; lower base effect would also be the main cause. On the cumulative basis, Taiwan’s exports and imports during the entire year of 2021 gave a trade surplus as at US$ 65.42 billion or increase by 10.92% year-on-year. As the export order have continued such momentum, it is also expected that Taiwan’s exports will maintain solid in 2022. In addition to exports, private consumption is believed to be another reliable engine driving the GDP growth thanks to increased real income as a result.
Taiwan’s consumer price index (CPI) increased by 2.62% in December 2021 compared with the same month of previous year, somewhat lower than the inflation rate of previous month The core inflation rate excluding prices of the energy and food increased by 1.84% in December 2021, higher than the core inflation rate in November 2021. Therefore, the inflationary pressure still remains. In addition, the wholesale price index (WPI) increased by 12.25% in December 2021 on the year-on-year basis, the consecutive nine-month in double digit growth. The pressure of surging input costs is still mounting meaning the producers need to transfer the cost to consumers eventually, if the imported inflation problem is not yet resolved soon.
As for exchange rate, the NTD went a bit stronger due to the relatively weaker USD in December. However, the US Federal Reserve’s upcoming policy is expected to be more hawkish in order to cope with the inflation rate standing at 7.0% in December. The NTD/USD stood at 27.69 in late December 2021, indicating a 0.43% appreciation, whereas the NTD has still been one of the strongest Asian currencies so far given Taiwan’s solid performance in GDP and export growths. Regarding the interest rate, it still remained low and steady in December 2021 due to the continued loose monetary operations by the CBC with respect to the current exchange rate situation; the lowest and highest over-night call rate in December 2021 stood at 0.080% and 0.083% respectively.
Business Outlook
The portion of manufacturing firms who perceived business were better than expected in the target month was 27.8% or decreased by 1.8 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 21.7% or increased by 0.8 percentage points than 20.9% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 50.5% or increased by 1.0 percentage points than the ratio of previous month’s respondents perceiving constant business. Overall, manufacturing firms perceived the business in the target month was somewhat more pessimistic compared with the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 35.0% in the target month or increased by 4.3 percentage points than 30.7% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 12.9% or decreased by 1.1 percentage points compared with 14.0% 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 52.1% or decreased by 3.2 percentage points compared with 55.3% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was as a result somewhat more optimistic compared with the previous month.
The manufacturing composite indicator for December 2021 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 102.36 points in November 2021 moved up to 103.91 points in December 2021. Figure 1 shows an increase of 1.55 points, the continued hike of second month after a sixth-month of consecutive drop.
The TIER service sector composite indicator for December 2021 adjusted for seasonal factors on moving average saw an upward correlation, and from a revision of as 98.21 points in November 2021 moved up to 98.59 points in December 2021. Figure 1 shows an increase of 0.38 points, the fifth month of consecutive increase.
In addition, the TIER Construction Sector Composite Indicator for December 2021 adjusted for the seasonal factors on moving average also saw an upward correlation, and from a revision of 109.08 points in November 2021 went up to 110.95 points in December 2021. Figure 1 shows an increase of 1.88 points, the second month increase after a one-month dip.
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 December survey and are expected to deteriorate over the next six months include:
Motorcycles Manufacturing, Securities.
● Manufacturers’ sentiments that have been in decline in the December survey, but are expected to improve over the next six months include:
None.
● Manufacturers’ sentiments that have been in decline in the December survey and are expected to remain sluggish over the next six months include:
Plastic Products Manufacturing, Iron and Steel Basic Industries, Motor Vehicles Manufacturing.
● Manufacturers surveyed who felt the December outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Yarn Spinning Mills.
● Manufacturers surveyed who felt the December outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Frozen Food Manufacturing, Edible Oil Manufacturing, Flour Milling and Grain Husking , Petroleum and Coal Products Manufacturing, Rubber Products Manufacturing, Electronic Machinery, Audio and Video Electronic Products Manufacturing, Precision Instruments Manufacturing, Telecommunication Services.
● Manufacturers surveyed who felt the December outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Slaughtering, Textiles Mills, Fabric Mills , Leather, Fur and Allied Product Manufacturing, Printing, Industrial Chemicals, Petrochemicals Manufacturing, Plastics and Rubber Raw Materials, Man-made Fibers Manufacturing, Chemical Products Manufacturing, Non-metallic Mineral Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Electric Wires and Cables Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Transport Equipment Manufacturing and Repairing, Motorcycles Parts Manufacturing, Banks, Insurance.
● Manufacturers’ sentiments that have improved in the December survey and is expected to deteriorate over the next six months include:
None.
● Manufacturers’ sentiments that have improved in the December survey and is expected to remain upbeat over the next six months include:
Food, Soft Drink Manufacturing, Paper Manufacturing, Metal Structure and Architectural Components Manufacturing, Cutlery and Tools Manufacturing, Communications Equipment and Apparatus Manufacturing, Electronic Parts and Components Manufacturing, Motor Parts Manufacturing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Retail Sales.
● Manufacturers’ sentiments that have improved in the December survey and the trend is expected to continue for the next six months include:
Prepared Animal Feeds Manufacturing, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Wood and Bamboo Products Manufacturing, Glass and Glass Products Manufacturing, Cement and Cement Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Industrial Machinery, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electrical Appliances and Housewares Manufacturing, Education and Entertainment Articles Manufacturing, Construction, Basic Civil Structure Construction, Real Estate Investment, Wholesale, Restaurants and Hotels, Transportation and Storage.
TIER Forecast (issued on 25th January, 2022.)
(NT$100 million, Chained (2016) Dollars)
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