Taiwan economy heats up further in August on strong exports

Taipei, Sept. 27 (CNA) Taiwan's index gauging the state of the economy flashed a "red" light in August, reflecting a booming or even overheating economy built on a strong demand for tech products and record exports, National Development Council (NDC) data showed.

The composite index of economic indicators rose four points from a month earlier to 39, the highest since November 2021, to flash a "red" light, which ranges from 38-45, according to the latest data compiled by the NDC.

It was the second red light of the year after June, and followed July's "yellow-red" light, which ranges between 32 and 37.

High demand for artificial intelligence (AI) applications, deliveries of new gadgets by international brands ahead of their launch, and deferred shipments caused by Typhoon Gaemi in July resulted in the red light, said Chiu Chiu-ying (邱秋瑩), director of the NDC's Department of Economic Development.

The old economy sector also showed an improvement in its performance, with growth in the base metal, machinery, and plastics leading the way, Chiu said during a press briefing Friday.

The NDC uses a five-color system to gauge Taiwan's economic performance. Blue indicates economic contraction, yellow-blue signals sluggishness, green represents stable growth, yellow-red refers to a warming economy, and red points to a booming or overheating economy.

Among the nine factors in the August composite index of economic indicators, merchandise exports, industrial production, and overtime hours in the industrial and service sectors, rose the most, when Taiwan's exports hit a record US$43.64 billion, NDC data showed.

The domestic economy also grew, Chiu said, citing another month of increases in leading indicators, such as the stock market's performance, and coincident indicators, such as electric power consumption.

Asked about the interest rate cuts announced by the United States Federal Reserve on Sept. 19, Chiu said global financial markets' positive performances over the past week showed that investors were expecting a "soft landing" by the U.S. economy.

Chiu cautioned, however, that the Fed only just began cutting rates from a two-decade high, making it hard to predict how the new cycle of rate cuts will affect the global economy.

Chiu said the impact will depend on the timing and scale of subsequent cuts, and how other countries adjust their monetary policy in reaction to U.S. policy.

If the U.S. economy remains stable, Taiwan will benefit from steady growth in global trade and economic activities, Chiu said.

The further development of AI and high performance computing technologies, and the rollout of new consumer electronic products in the supply chain should also give a boost to Taiwan's export-oriented economy, according to Chiu.

The NDC also expected to see growth in investment thanks to a buildup of advanced capacity by semiconductor makers, international tech firms' plans to open research and development centers or data centers in Taiwan, and a corporate shift toward cutting emissions and automation.