Export-led Taiwan signals weakening global demand in new omen of recession as WTO predicts trade downturn
- Taiwan’s National Development Council said its ‘overall monitoring indicator’ for the US$760 billion economy fell by one point in August to 23
- World Trade Organization chief Ngozi Okonjo-Iweala calls prospects for trade ‘dim amid growing signs of a global economic downturn’
Export-reliant Taiwan lowered a key indicator to its lowest level in more than two years this week due to slowing consumer demand around the world, as the head of the World Trade Organization (WTO) warned of a global economic downturn.
Taiwan’s National Development Council said its “overall monitoring indicator” for the US$760 billion economy fell by one point in August to 23.
Taiwan could take a “hit” from global inflation and interest rate increases, plus economic fallout from the Russia-Ukraine war, a member of staff from the indicator department within the council, who asked not to be named as they are not authorised to speak to the media, said on Wednesday.
On Tuesday, WTO director general Ngozi Okonjo-Iweala called prospects for trade “dim amid growing signs of a global economic downturn”, pointing to “simultaneous exogenous shocks” in much of the world.
We have security shocks, we have climate shocks, we have energy shocks, we have food price shocks, all of this hitting countries at the same time
“We have security shocks, we have climate shocks, we have energy shocks, we have food price shocks, all of this hitting countries at the same time,” she told the WTO’s 2022 Public Forum.
Global trade growth this year and in 2023 is likely to slow by more than expected and reflect a decline in consumer demand, the International Monetary Fund said in its World Economic Outlook Update in July.
“In terms of what we perceive so far from the industry and our clients, most businesses, including ourselves, are not optimistic about what’s ahead of us for the next quarter,” said Kent Chong, a partner with professional services firm PwC in Taipei.
“Business, orders, the pipelines – we’re not optimistic even though Christmas is on its way and traditionally Christmas is the peak season.”
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Mainland China is Taiwan’s biggest trade partner, accounting for around a quarter of the self-ruled island’s trade in 2021.
Last week, Taiwan’s central bank lowered its 2022 gross domestic product (GDP) growth forecast by 0.24 percentage points to 3.51 per cent.
Exports make up around 70 per cent of Taiwan’s economy, with the island best known for manufacturing consumer electronics, machinery and petrochemical goods.
A reliance on semiconductor exports makes Taiwan a “good bellwether” for demand for electronics, Lim added.
It’s too early to draw from it that the region or world is headed for a massive recession
But Taiwan, like mainland China, should look to its coronavirus controls as a cause for slowing exports, said Jayant Menon, a visiting senior fellow with the ISEAS-Yusof Ishak Institute’s Regional Economic Studies Programme in Singapore.
Both Taiwan and mainland China closed their borders in early 2020 and still require a multi-day quarantine period for inbound travel.
“It’s too early to draw from it that the region or world is headed for a massive recession,” Menon said.
