In the midst of a recession, Taiwan has revised down its 2023 economic growth forecast by a smidgen due to sagging global demand for its hi-tech goods, but analysts expect to see a rebound toward the end of this year.

The Directorate-General of Budget, Accounting and Statistics said on Friday that the island’s gross domestic product (GDP) would firm by 2.04 per cent this year over 2022. In February, it had forecast 2.12 per cent growth.

Global inflation, interest rate hikes, and “soft” end-user demand have met with supply-chain chokepoints to “restrain” foreign trade with Taiwan, the directorate-general said.

Taiwan fell into recession in the first three months of 2023.

Declining sales of smartphones and PCs across the globe have cramped shipments of electronic devices and their parts, including the island’s world-leading semiconductors. Telework and home-study trends during the pandemic sparked a run on those devices in major markets such as Europe and the US.

 

“They’re in a technical recession, exports are really poor, and I can’t see how that’s going to turn quickly,” said Alicia Garcia Herrero, Asia-Pacific chief economist with Natixis Corporate & Investment Banking in Hong Kong. “The main reason is the semiconductor cycle.”

Tech makes up 30 per cent of Taiwan’s US$800-plus billion economy, and about 60 per cent of the world’s chips are produced on the island.

Export orders placed with Taiwanese firms, largely in the tech space, have declined for the past eight months.


Among Taiwan’s top markets, the US will grow its GDP by just 0.1 per cent this year, the US Congressional Budget Office forecasts. The European Union’s economic growth should reach 1 per cent, according to the European Commission. China’s GDP is forecast to grow 5 per cent this year.
 

Fitch Ratings blamed the world downturn in semiconductor sales on the Russia-Ukraine conflict, US restrictions on Chinese access to advanced chipmaking technologies, and a decline in device demand.

But by the end of the year, Fitch says, supply-and-demand imbalances should ease as companies cut production.

A rebound in semiconductor chip buying in the second half of 2023 would improve Taiwan’s full-year economy, analysts say.

Demand for chips used in AI, electric vehicles and foldable smartphones are expected to support sales. Shipments of foldable phones will total 19.8 million units this year, an “impressive” 55 per cent increase from 2022, Taipei-based market research firm TrendForce predicts.

Taiwan’s National Development Council said on Friday that its index of leading indicators had expanded by 0.13 per cent in April.

 

The indicators, which the government uses to make six-month economic forecasts, include the health of the manufacturing sector, domestic stocks, net hiring, and imports of equipment to power the semiconductor industry.

Inflation is coming down in Taiwan as well, while government subsidies for Taiwanese citizens are having an impact, Garcia said.

Exports of components and other gear are already thriving in the Indian market, said Hu Jin-li, a professor with the Institute of Business and Management at National Yang Ming Chiao Tung University in Taipei.

Exports to India rose nearly 20 per cent in the first four months of the year over the same period of 2022, reaching US$2 billion, according to Taiwan Bureau of Trade data.

“Consequently, export orders may recover in the fourth quarter of 2023 as an optimistic forecast, or in the first quarter of 2024 as a conservative forecast,” he said.
 

• Link : South China  Morning Post_Ralph Jennings