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Economy remains in contraction for 10th straight month in August

09/27/2023 09:53 PM
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CNA file photo
CNA file photo

Taipei, Sept. 27 (CNA) The local economy stayed in contraction mode for the 10th consecutive month in August as an index gauging economic fundamentals continued to flash a "blue light," the National Development Council (NDC) said Wednesday.

Despite another blue light in August, the NDC, the top economic planning agency in the country, said Taiwan's economy could climb out of contraction in the fourth quarter with the country's export momentum expected to pick up on the back of growing business from emerging technologies such as artificial intelligence development.

Data compiled by the NDC showed the composite index of economic indicators remained unchanged from a month earlier at 15 points in August, staying in the "blue light" category from nine to 16.

The leading indicators, which assess the economic climate over the next three to six months fell 0.30 percent from a month earlier to 99.06 in August, while coincident indicators, which value the current economic conditions, bucked the downturn, rising 0.91 percent to 97.48.

The NDC uses a five-color system to gauge the country's economic performance, with blue indicating economic contraction, yellow-blue representing sluggishness, green signifying stable growth, yellow-red referring to a warming economy, and red pointing to an overheated or booming economy.

Graphic: National Development Council
Graphic: National Development Council

Among the nine factors in the August composite index, the sub-index on the money supply fell one point from a month earlier to flash a blue light, compared with a yellow-blue light in July, while the sub-index on exports in merchandise rose one point to flash a yellow blue light, an upgrade from a blue light in July, the NDC said.

The other seven factors -- production, non-farm payrolls, stock price changes, machinery and electric equipment imports, sales posted by the manufacturing sector, revenue generated by retail, wholesale and food/beverage industries, and business sentiment among manufacturers -- remained unchanged, the NDC added.

Speaking with reporters, Chiu Chiu-ying (邱秋瑩), deputy director of the NDC's Department of Economic Development, said a recovery in the coincident indicators indicated a slight improvement in the local economy.

Most of the sub-indexes relating to the coincident indicators, Chiu said, moved higher from a month earlier in August, including industrial production, electricity consumption, sales generated by the manufacturing sector and the wholesale and retail industry, employment and merchandise exports, which signal positive leads for the economy in general.

However, as the leading indicators continue to fall, she said, the NDC will keep a close eye on how the economy develops over the next few months.

Sept. 21: Central bank cuts Taiwan's GDP growth forecast to 1.46% for 2023

Chiu added she was not pessimistic about the local economy despite a 10th consecutive blue light in August.

The worst could be over for the local economy, as domestic demand remains solid and there are signs that exports have started to pick up, Chiu said, but admitted the pace of the export momentum increase remains slow.

With the August composite index only two points away from the yellow-blue light category ranging from 17 to 22, Chiu said, it will not be hard for the index to move into the yellow-blue light range in the fourth quarter as peak season effects should boost the country's exports.

Citing a recent report from the International Monetary Fund, Chiu said trade worldwide will increase 3.7 percent in 2024 compared with an anticipated 2 percent rise in 2023, a positive sign for Taiwan's outbound sales.

In addition, increasing AI development and the launch of new tech gadgets are expected to pave the way for economic growth in Taiwan over the longer term, Chiu said.

(By Pan Tzu-yu and Frances Huang)


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