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Taiwan's Overall Manufacturing Output Forecast to Rise 3.1% in 2014: IEK

2014/05/27 | By Steve Chuang

With global and domestic economies both gradually gaining growth momentum, Taiwan's overall output value by manufacturing industries is forecast to grow 3.1% yearly this year, up 0.89 of a percentage point from last year, according to Industrial Economics & Knowledge Center (IEK), a market research department under the government-funded Industrial Technology Research Institute.

Among the four mainstay manufacturing industries described by the Taiwanese government, output by the base metal and machinery industry is predicted by IEK to grow 1.36% to end a persistent downturn in the past two years, mostly thanks to simmering global demand for machinery, auto and motor parts.

On another front, IEK projects output value by the IT (information technology) and electronics industry to surge 5.11% in 2014, partly driven by strong market demand for low-to-middle-end mobile Internet devices worldwide, and partly by growing global market shares achieved by local semiconductor foundries through upgraded production processes. Also notable is that following years of technology upgrades into higher-end, higher-definition display panels, domestic makers of this kind, IEK says, have increasingly benefited from the rise of 4K2K TVs, which will contribute to the industry's overall output growth as well.

In the chemical industry, output value is expected by IEK to soar 3.01%,  partly due to surging demand for chemicals worldwide amid widespread economic recovery, and partly to the payoff of Taiwanese suppliers' efforts to explore emerging countries.

As to the daily commodities industry, IEK forecasts output value to rise 1.93%, based partly on consumers' increasing demand for healthy, leisure food, and partly on the booming local sector of food services. Besides, with global demand for functional clothing steadily growing, local textile and apparatus makers will see increasing orders to help drive the industry's overall output this year.

UncertaintyAlthough Taiwan is expected by global economic research institutes to benefit from steady economic recovery in developed countries and finish this year with stronger economic growth than last year, IEK warns that the bright economic future is likely to be shadowed by some negative factors, either ongoing or latent.

Firstly, IEK says that with the U.S. tapering QE3 to motivate foreign investors to gradually withdraw capital from emerging markets, which will likely trigger a new wave of interest-rate hikes worldwide, Taiwanese manufacturers will likely witness exports notably decline in the short term, given that China and the ASEAN (Association of Southeast Asian Nations) member countries are Taiwan's major export outlets.

Meanwhile, Taiwan's current stalemate in forging FTAs with foreign trade partners will also undermine growth of manufacturing output, says IEK. For instance, negotiations between Taiwan and China on the cross-strait goods trade agreement, originally scheduled to be finalized at the end of this year, have stalled, primarily because China has yet to accept Taiwan's demand for duty cuts on imports of automotive, display panels, petroleum products and machine tools. Meanwhile and if China and Korea sign FTAs, IEK warns, Taiwanese companies, without similar FTAs, will soon lose the lucrative market to Korean rivals, which will severely impact manufacturing industries, and reduce both domestic and foreign investors' willingness to invest locally.

Additionally, IEK also points out other factors working against Taiwan's economic growth, including growing worry about deflation in the euro zone; Japanese government's current account deficit and fiscal deficit coupled with the consumption-tax hikes, which may hamper the country's economic recovery; and political unrest in the Ukraine to choke economies in nearby countries and push up fossil fuel prices. (SC)