Taiwan's National Development Council (NDC) on Monday reported a “red light” economic indicator for June, signaling strong economic activity. This is the first such signal since January 2022. The NDC says the red light for June was driven by strong semiconductor demand, increased server needs, and a recovery in traditional industry exports. However, scholars warned on Tuesday that the biggest risk to Taiwan's economy in the second half of the year is exports.
National Central University's Research Center for Taiwan Economic Development CEO Dachrahn Wu (吳大任) says June's exports reached USD$39.9 billion, a 23% annual increase due to AI demand. He emphasized that maintaining this growth depends on export performance.
Wu highlighted two issues, the first being a significant correction in Taiwan's stock market, particularly in AI stocks, that indicates possible overinvestment in AI equipment. The second issue he pointed to was a potential weakening in U.S. consumer spending. Wu says Taiwan's exports to the U.S. accounted for 23.2% of total exports in the first half, the highest in 24 years. However, rising household debt and a 4.1% unemployment rate in the U.S. suggest declining consumer power, which could impact Taiwan's exports.
Wu adds that a potential interest rate cut by the U.S. Federal Reserve could signal a downturn in the U.S. economy. However, it would take three to six months for such a measure to impact demand, meaning short-term benefits for Taiwan's exports are unlikely.