Taiwan's economy worsens

Taiwan's economy is heavily dependent on semiconductors

The Taiwanese economy is facing some of the toughest conditions for more than 20 years, as global demand for high-tech products slumps.

Unemployment rose to a record high in June, while industrial output recorded the biggest monthly fall since 1975, and export orders showed their steepest drop since 1981, according to a new batch of government data released on Monday.

"Taiwan is now experiencing its worst economic crisis in three decades," said Wu Chung-shu at the Academia Sineca think tank.

Last week Academia Sineca was one of two influential think tanks to cut their economic growth forecasts for 2001.

The figures suggest little recovery from the bleak first quarter, when growth in gross domestic product plunged to 1.06%, the lowest level for 26 years.

The government of Taiwan said in May that it expects overall GDP growth of just over 4% this year, but most economists now point to little more than 2%.

Unemployment

Unemployment was 4.5% in June, almost double the June 2000 level. It could well climb further as new graduates seek jobs, a spokesman for the government's statistics office said.

The chance that joblessness in 2001 will top the government's worst case scenario of 4.1% "is definitely there," said statistics bureau spokesman Chen Jin-cheng.

Export orders

But perhaps the most sobering data of the day came from the Ministry of Economic Affairs, showing a huge slump in export orders, on which Taiwan's economy is heavily reliant.

Export orders in June slid 19.9% year-on-year to $11.2bn. A consensus forecast of economists had predicted a contraction of only 16.8%.

For the first half of 2001, export orders fell 7.2% year on year to $67.8bn.

"Export orders in the second half will remain in negative growth," said Chang Yaw-tzong, chief statistician at the Ministry of Economic Affairs.

The data revealed falling sales in the two most important sectors of the economy - electronic goods and IT and communications technology.

Export orders in the second half will remain in negative growth

Chang Yaw-tzong, Ministry of Economic Affairs

Orders for electronics products were down a massive 33.8% since June 2000, at $2.1bn, and down 4.4% since May this year.

IT and communications technology orders were worth $2bn, down 21.6% year-on-year, though they had risen 7.6% since May 2001.

Equally bleak were double-digit declines in orders from all Taiwan's major export markets.

Orders from the United States, Taiwan's biggest export market, were down 20.3% on June last year to $3.7bn.

Orders from Hong Kong contracted 16.4% year on year to $2.1bn; Japanese orders fell 23.4% to $1.2bn and European orders slid 30.2% to $1.6bn.

Industrial output

Industrial output shrank by 11.2%, said the Ministry of Economic Affairs.

Manufacturing output fell 11.8% year-on-year to show a 7% fall in the first half of this year.

The fall in industrial output was worse than an economists' forecast for a 9.2% decline.