Econ Slump in the Offing?

The last few months projections for GDP growth at most of the major think tanks and financial firms have been falling. Now the DGBAS is warning that inflation will be higher than expected.

The DGBAS’ warning came after the agency announced yesterday that year-on-year growth in the consumer price index (CPI) was 1.44 percent last month, compared with a revised 1.25 percent increase in March.

Not only are rising fuel costs pushing up prices but the recent heavy rains have reduced supplies of fresh vegetables, also driving up costs. The government also predicts that exports will fall for the first half of the year:

Exports to China and Hong Kong contracted 11.6 percent year-on-year to US$9.86 billion following slower economic activity, with exports of machines, metals, plastics and chemicals declining for a second consecutive month, the report said.

Meanwhile, exports to the US fell 16.3 percent from the previous year to US$27.06 billion as a result of lower exports of information and communication technology, products, while outbound shipments to Japan were down 10.6 percent at US$1.46 billion, ministry data showed.

However, exports to Europe and the six main ASEAN members both rebounded last month, with annual growth standing at 3.5 percent and 4.4 percent respectively.

Nine of the nation’s 10 major export sectors posted year-on-year declines last month, while exports of transportation equipment rose 17.9 percent to US$1.01 billion from a year ago, its highest ever level, data showed.

Donna Kwok (郭浩庄), an economist for Greater China at HSBC Asia, said in a note yesterday that she expected demand from the West, especially Europe, to constrain export growth for a while longer.

Meanwhile, the steady economic slowdown from the gradual impact of global energy price increases in the first quarter of this year could encourage the central bank to keep interest rates unchanged at least until the fourth quarter, Kwok said.

Remember when ECFA was going to save us from this? Yeah, right. As I noted a couple of weeks ago, trade with China -- with which we have the "free trade agreement" ECFA -- is falling, while trade with ASEAN -- with which we have no FTAs -- is rising.
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Daily Links:

• Japan Times: Yes, I can use chopsticks. This will resonate with expats here in Taiwan
• Paul Lin argues more or less that stock market tax announcements are made to facilitate insider trading. If one knows about the announcement in advance...
• Chinese radio stations flood southern Taiwan with propaganda

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