Taiwan’s Exports Decline by Record 44.1% on Global Demand Drop

By Janet Ong

Feb. 9 (Bloomberg) -- Taiwan’s exports fell by an unprecedented 44.1 percent last month on reduced global demand for the island’s computer chips, laptops and mobile phones.

January’s plunge eclipsed the previous record 41.9 percent decline set only a month earlier and extended the longest losing streak in seven years, the Ministry of Finance said in Taipei today. That was in line with the median estimate of a 48.2 percent drop in a Bloomberg survey of 11 economists.

The report adds pressure on policy makers to provide further stimulus to an economy that shrank in the third quarter for the first time since the technology bubble burst in 2001. Exporters Taiwan Semiconductor Manufacturing Co. and Wintek Corp. have cut workers amid declining sales, helping drive up the jobless rate to a five-year high of 5.01 percent in December.

“Taiwan, being one of the most export-oriented economies in Asia, certainly is suffering from the synchronized global slowdown,” Frederic Neumann and Christopher Wong, Hong Kong- based economists at HSBC Global Research, wrote in a report.

“Second-round effects from the collapse in exports are beginning to emerge in the domestic economy, with unemployment rising sharply,” they said. “Policy makers will need to roll out more stimulus measures.”

Taiwan’s central bank reduced borrowing costs six times since September, paring the benchmark rate to 1.5 percent.

The government plans stimulus spending of NT$858.5 billion ($25.5 billion) over four years, equivalent to 6 percent of gross domestic product, on infrastructure projects, consumer handouts and tax cuts. It distributed NT$82.9 billion worth of shopping vouchers last month to stoke domestic demand.

Asia’s Decline

Taiwan’s slump is echoed in economies across Asia. South Korean overseas shipments tumbled by a record 32.8 percent in January. China’s exports probably fell 14 percent last month from a year earlier, the biggest drop in a decade, according to economists surveyed by Bloomberg ahead of figures due this week.

The report was released after the close of trading on the stock exchange. The Taiex share index rose 0.5 percent. Taiwan’s dollar gained 0.2 percent to NT$33.633 versus the U.S. dollar.

Overseas shipments fell to $12.37 billion last month. Imports declined 56.5 percent to $8.97 billion. The island posted a trade surplus of $3.4 billion, compared with $1.86 billion in December.

Exports are equivalent to about 70 percent of GDP. China and the U.S. are the island’s largest overseas markets.

Lunar New Year

Tony Phoo, an economist at Standard Chartered in Taipei, said the decline in shipments was exacerbated by Lunar New Year holidays, celebrated from Jan. 26 to Jan. 30, which reduced the number of working days in China and Taiwan.

Shipments to China slumped 63.5 percent in January because of weaker demand for electronic components used in products assembled by the mainland for export, today’s report showed.

Exports to the U.S. declined 26.5 percent from a year earlier and sales to Europe fell 32.6 percent.

“Demand from China and other emerging-market economies, which had been the main locomotive for Taiwan’s exports, is showing substantial declines,” Enoch Fung and Shirla Sum, Hong Kong-based economists at Goldman Sachs Group Inc., wrote in a report today.

Exports of electronic products dropped 45.3 percent last month, after falling 43.4 percent in December.

Taiwan Semiconductor last month forecast its first quarterly loss since 1990 and said it has cut its workforce. The company is a benchmark for the technology industry because it makes chips for everything from mobile phones to flat-screen televisions.

Hon Hai Precision Industry Co., which makes iPhones for Apple Inc. and computers for Dell Inc., is slashing jobs in Taiwan and abroad as demand for consumer electronics slows.

To contact the reporter on this story: Janet Ong in Taipei at jong3@bloomberg.net.