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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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