Taiwan: Merchandise exports decline in October
Merchandise exports decreased 4.5% in annual terms in October, contrasting September’s 3.4% rise and market expectations of an increase. While IT exports surged by more than a third—likely linked to strong AI-related demand—this was more than offset by lower exports of base metals, machinery, plastics and electronics. Looking at destinations, exports to Japan, Europe and China fell. Meanwhile, merchandise imports plummeted 12.3% over the same month last year in October (September: -12.2% yoy).
As a result, the merchandise trade balance deteriorated from the previous month, recording a USD 5.8 billion surplus in October (September 2023: USD 10.3 billion surplus; October 2022: USD 3.0 billion surplus). Lastly, the trend improved, with the 12-month trailing merchandise trade balance recording a USD 68.2 billion surplus in October, compared to the USD 65.4 billion surplus in September.
Our Consensus is for exports and imports to both return to growth in 2024, buoyed by the likely exhaustion of the global electronics destocking cycle and burgeoning demand for AI applications. However, higher-for-longer interest rates in developed markets and shaky economic activity in China pose downside risks.
On the risks to the outlook, EIU analysts said:
“The diverging trajectories of Asian and Western export demand reinforce our apprehension that macroeconomic pressures in the US and Europe may offset the benefits derived from electronics inventory destocking. There is an adjacent risk that a slower than expected revival in global demand will heighten reluctance among Taiwanese enterprises to invest in expansion plans, creating a secondary brake on industrial growth.”