Taiwan's Export Growth Forecast Lowered to 7.47%

Due to the effects of the slackening global economy and soaring international oil prices, the Bureau of Foreign Trade (BOFT), which is under the aegis of Taiwan's Ministry of Economic Affairs (MOEA), has lowered its forecast for Taiwan's exports growth this year to 7.47%, down from the original 9.77%. The BOFT also predicts that the trade surplus for the whole year will drop below US$2 billion, the lowest level since 1992.

The forecast is based on a report completed by the Chung-Hua Institution for Economic Research under the BOFT's commission. The BOFT attributes the adjustment to the deterioration in the overall foreign-trade environment since July, when the previous forecast was made.

Meanwhile, the BOFT has also cut its forecast for import growth to 10.28%, from the original 11.24%.

Due to the decline in export growth momentum, Taiwan's foreign-trade surplus will slide to US$1.997 billion, less than half the original forecast of US$4.25 billion. If realized, the figure will be the lowest since 1982, and it will be the first time for the surplus to drop below the US$2 billion mark.

BOFT officials note that a major reason for the shrinking foreign-trade surplus is the soaring global price of oil. As a result, the cost of Taiwan's crude-oil imports shot up US$3.72 billion in the first eight months this year, accounting for 84% of the reduction in the foreign trade surplus. However, even if excluding the oil price factor, the foreign-trade surplus during the period would still be less than US$5 billion, a far cry from the island's past performance. Statistics show that during 1990s, Taiwan's foreign trade surplus ranged from US$6 billion to US$16 billion annually.

Wu Hsin-hua, deputy director general of BOFT, points out that in addition to the downturn in the global economy and skyrocketing oil prices, there are also structural reasons behind the decline in Taiwan's trade surplus, as a number of other countries continued to enjoy ample surpluses during the period. In the first eight months, for instance, Japan still chalked up more than US$50 billion in trade surplus, while South Korea garnered more than a US$14.3 billion surplus in the first seven months.

An important factor behind Taiwan's shrinking trade surplus is the prevalence of the operational mode of "domestic order reception, overseas production." Under this mode, a large amount of Taiwanese-owned businesses take orders on the island but manufacture goods in China, and their outbound products are registered as the exports of China.

The BOFT points out that the recent revaluation of the renminbi (RMB, or Chinese yuan) and the stabilization of the U.S. dollar are factors favorable to Taiwan's export business. However, there also exist a number of adverse factors for Taiwan's exports, including the continuing rise in U.S. interest rates, the continuation of China's macro-economic control policy, further rises in international oil prices, and the financial straits of the U.S. government.