Taiwan's economic growth forecast down 2.1%

Export growth is expected to shrink by 3.0% as demand for electronics and private consumption declines.

Taiwan’s economic growth forecast slowed to 2.1% from 2.6% in 2018 and is still expected to go down as external trade headwinds persist, according to a report by Fitch Solutions. As exports have declined due to the rising trade tensions in the region, export growth is expected to slow to 3.0%, down from 3.6% in 2018.

Taiwan’s manufacturing outlook is also expected to remain weak, with gross fixed capital formation growth to decline to 4.0% in 2019 from 6.1% in 2018. Accordingly, consumer electronics continued to suffer from falling demand, with worldwide smartphone shipments declining and market oversaturation.

Fitch Solutions noted that the trade standoff has led to local semiconductor companies continuing to suffer from falling demand. The electronics Purchasing Managers' Index (PMI) declined to 44.4 in May from 64.9 in March 2018, whilst overall PMI declined to 45.5 in June from 48.4 last May and 54.5 in June 2018. The sub-index for the six-month outlook also fell to 42.9 in June from 48.5 last month.

Private consumption growth is also expected to decline to 2.0% from 2.1% in 2019 as consumers cut back from spending. Retail sales growth has declined to 2.0% YoY in May, down from 8.1% in April 2018. The report also identified dismal employment as a contributing factor to less consumption, with Taiwan’s employment growth at 0.6% YoY in May, the lowest reading since December 2009 in the midst of the Global Financial Crisis.

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