Persistent contraction of exports likely to put pressure on Taiwan’s economy

In April, Taiwan’s exports orders declined for the 13th consecutive month. It fell 11.1% y/y, as compared with market forecast of a drop of 4.5% and March’s 4.7% decline. Constant shrinking of export orders will put stress on the Taiwanese economy that has contracted for three straight quarters. Meanwhile, the Korea Customs Service (KCS) stated that Korea’s exports rose 2.1% month-to-date from a year ago with the help of growth in exports of vehicles and related parts to the US. This might lead to an end to contracting exports, said Scotiabank in a research report.

Meanwhile, there are possibilities of a rising geopolitical threat throughout the Taiwan Strait, noted Scotiabank. The new President of Taiwan, Tsai Ing-wen, did not talk about “1992 consensus” in her inaugural speech. She addressed that in order to increase the scope and diversity of Taiwan’s economy, the country will promote a “New Southbound Policy”, and bring an end to its extreme dependence on a single market.

The Taiwanese dollar is likely to depreciate slowly against the US dollar due to worries regarding the US Fed’s cycle of hiking rate, rising uncertainty of cross-Strait relations and Taiwan’s central bank’s easing bias, according to Scotiabank.

“We continue to expect USD/TWD to trade between 32.10 and 33.00 in May. But if the pair breaks above 33.00 psychological resistance level, further upside room is opened”, added Scotiabank.