Taiwan Exports Improve, Thanks To Electronics

Taiwan's exports have improved on a yearly basis, but that is all really down to electronics.

Taiwan exports start growing again

Taiwan's exports grew by 0.4% year-on-year in July, which broke the negative year-on-year contraction since March, but the pattern of trade hasn't changed.

Taiwan is still relying on electronics for export growth. Exports of electronic parts grew by 15.5%YoY and telecommunication products rose by 18.5%YoY while other items continued to contract. In particular, machinery exports shrank by 14.1%YoY.

This clearly shows that Taiwan’s exports have a narrow focus and can only have an overall improvement if the global economy continues recovering. But this may not be possible anytime soon given the emerging Covid-19 clusters as national lockdowns are relaxed.

Imports suggest weak domestic demand

On the flip side, Taiwan's imports continue to shrink. Headline imports contracted by 6.8%YoY while consumer good imports declined by 7.3%YoY and notably, mobile handsets fell by a whopping 33.0%YoY.  

The data reflects weak domestic demand and the partial recovery of the export sector. Only electronic producers have benefited from the recovery, but other manufacturers and exporters continue to suffer from the economic fallout of Covid-19.

Big trade surplus may not offset weak consumption factor in GDP

Taiwan's trade surplus rose to $5.37 bn, which was the highest since August 2019. Softer import growth compared to export growth will continue to contribute a bigger trade surplus, which will support GDP growth slightly, but overall, we expect consumption growth to be too weak to be entirely offset by the increase in net exports in 3Q20.

Our forecast of GPD is -1.0%YoY and -1.5%YoY for 3Q20 and 4Q20, respectively, which will bring the full-year GDP forecast to -0.4%, after -0.7%YoY growth in 2Q20.

Disclaimer: This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information ...

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