Taiwan is beginning to feel the effects of the global credit crisis. International orders for Taiwan products are declining. Taiwan's export-driven economy depends on the prosperity of the rest of the world. Thibault Worth reports from Taipei.
The Taiwan government says October has not been a good month for exports. John Deng is vice minister of Economic Affairs.
"We compile a number of our orders received for our exporters. And the number doesn't look really great this month."
Deng says if it continues the drop-off in orders will translate into decreased export volume. That is not a good development for the island's economy, which is heavily dependent on exports - particularly of high-end electronics, computer chips and plastics.
Like business owners elsewhere in Asia these days, Taiwan business leaders are worried that the recent plunge in global financial markets and the nearly frozen credit markets could hurt exports. Economists around the region warn that if the crisis causes a severe recession in the United States and Europe, exports from Asia may shrink.
For many exporters, trouble began before the recent market gyrations. Joseph Jao owns a business in Taipei exporting plastic sheeting and nylon fabrics. He says his customers in Latin America started putting in fewer orders last October. To make things worse, during the first half of this year, the strong Taiwan dollar resulted in him losing money for the first time in 26 years.
"The first six months we are in deficit, we are in the red. The result is quite awful."
Jao says now that the Taiwanese currency is depreciating, he expects business to improve slightly. But he says his customers have taken a wait-and-see approach because of unstable commodity prices and currency rates.
Standard Chartered last week lowered its economic growth estimate for Taiwan. The British bank expects a mild contraction in the third quarter of this year. The downgrade followed similar revisions by Morgan Stanley and Deutsche Securities, which is now forecasting just one percent economic growth in 2009.
However, economists say Taiwan's domestic banks have weathered the global crisis relatively well, buffered by high levels of capital, good liquidity and prudent regulation. The U.S. research firm Global Insight says Taiwan's banking system is the second most stable among the world's emerging economies.