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June, 26, 2016

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Road to export recovery remains bumpy: report

TAIPEI -- Taiwan's exports are unlikely to grow steadily next year given ongoing political wrangling in Europe and fiscal problems in the United States, Bank of America Merrill Lynch said in a recent report.

Taiwan's exports dropped 1.9 percent annually in October, well below market expectations of positive growth of 2 percent, the bank said.

A 36.1-percent decline in the value of information technology and communications product shipments was the main culprit, dashing investor hopes for a sustainable recovery, Merrill Lynch said.

"In our view, Taiwan's road to export recovery will likely remain very bumpy in 2013," Marcella Chow, a Hong Kong-based economist at Merrill Lynch, wrote in a Nov. 15 report.

Though export growth will probably rebound to a mid single-digit annual rate in the next few months due to a lower base of comparison, Taiwan's exports will only resume a healthier pace of growth when demand in external markets stabilizes and shows sustained strength, she said.

Taiwan's 2013 export prospects depend on improving final demand in China, which will be driven by more supportive measures as the political dust settles and top policymakers shift their focus to stimulating economic growth and financial markets, Chow said.

Another key factor, she said, will be whether external demand in developed economies picks up and vendors rebuild their inventories, which would help underpin a firm recovery in Taiwan's exports.

Chow believed the inventory cycle has already nearly hit bottom, though the recovery process will likely be delayed, as political wrangling in Europe and the U.S. fiscal cliff could bring confidence and uncertainty shocks to manufacturers.

"In our view, whether China's policy offsets slowing demand stemming from U.S. austerity shocks will probably be the biggest swing factor for Taiwan's export performance in 2013," she wrote.

As a result, Chow forecast Taiwan's exports to grow at between 2 percent and 6 percent next year.

Earlier this month, British bank Barclays PLC predicted that Taiwan's exports are likely to improve in November as the momentum of its information and communications technology (ICT) exports remains robust.

The improvement should be driven by new smartphone models from Taiwan's HTC Corp. and a boost from the recently launched iPad mini tablet by Apple Inc. and non-Apple tablet computers, the bank said.

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