July was a historic month for trade in Taiwan with exports hitting all-time highs.
Customs statistics from the ministry of finance showed that in the first seven months of the year, exports amounted to $135.1bn, up 7.6% year-on-year, with July alone showing a rise of 8.2% to $21.2bn.
Despite the rise, the growth rate this year was described as "unsatisfactory" by the Bureau of Foreign Trade (BoFT), as it had failed to meet government expectations of a double-digit increase.
The BoFT said several factors were to blame.
"The inventory adjustments for international electronics, IT [information technology] and communications products influenced our export momentum towards the U.S. and Japan in the first half of this year," it said.
Exports of semiconductors grew by 6% in the first half of the year compared to growth of 31.6% over the same period in 2006. The BoFT called this "a rare phenomenon" and cited it as the main reason for the slowdown in export growth.
Taiwanese manufacturers are increasingly relocating abroad so that while export orders are received in Taiwan, many of the products are being produced overseas.
According to the ministry of economic affairs, orders for exports amounted to $29.7bn in July 2007, up 23.5% year-on-year and a record high. In June, they amounted to $28.7bn, up 15.19% year-on-year.
This phenomenon is reflected in official figures. Over the first half of this year, orders for exports registered a 12.8% increase, according to the BoFT, while exports grew at a lower rate of 7.5%. "This gap resulted from the proportion of overseas production astonishingly having increased by 46%, which is the main reason for the sluggish export growth nowadays," said the BoFT.
With a value of more than half of Taiwan's GDP, exports clearly play a major role in the country's economy, leaving it vulnerable to the performance of global markets. An additional vulnerability is the concentration of exports in the areas of electronics, IT and communications-related products, which was highlighted by the BoFT in its analysis of poor performance. This lack of variety leaves Taiwan ever more susceptible to fluctuations in the world economy.
The US, Taiwan's third largest trading partner, is experiencing an economic slowdown, which is having a visible knock-on effect in exports of Taiwanese goods. For example, in the first six months of the year, exports to the US grew by a mere 0.6%, according to US Department of Commerce trade statistics. In July, export orders from the US rose only 6.5% on the month before while orders from Europe were up 32.5%. With the EU enjoying prosperous economic growth, Taiwan forecasts exports to the EU to rise sharply by 12.1% in the second half. The boom in demand from the EU and China are helping to cushion the drop in US demand.
The BoFT said exceptional growth was recorded in July exports to oil-producing countries and emerging economies such as the United Arab Emirates, which saw a 78.8% increase in exports from Taiwan, Saudi Arabia (72.9%), Australia (38.5%), Vietnam (22.7%) and India (22.1%).
Industry insiders expect semiconductor exports to boom, with outstanding performance in this sector anticipated in 2008. Exports in general are expected to pick up further in the rest of the year as the second half is traditionally Taiwan's peak season for exports. Based on the BoFT's analysis of the moderate growth in international economies, evidence of a resurgence of vitality in Taiwan's domestic economy, as well as an upcoming peak consumer season for the electronic product and the panel-display industries, it anticipates that Taiwan exports "will continue to grow steadily throughout this year and two-digit growth is still anticipated".