Taipei, Taiwan – Taiwan’s National Development Council (NDC) has reported that the country’s economic monitoring indicator remained in the “yellow-red” zone last month, signaling that the export-oriented economy is still healthy but may be reaching an inflection point.

According to the NDC, the economic monitoring indicator dropped by two points to 32 due to weak industrial production caused by sluggish sales of metal products and declining demand for petrochemical products. The NDC measures economic health using a five-color system: blue for recession, green for stable growth, and red for boom. The dual colors of yellow-red and yellow-blue signify that the economy is shifting towards either a better or worse state.

“We remain cautiously optimistic about the economy and will closely monitor any disruptive factors,” said Chiu Chiu-ying, the economic director of the NDC. She added that the disappointing industrial output was also linked to shipping disruptions caused by two typhoons.

The official noted that while domestic electronics companies continue to benefit from the artificial intelligence (AI) boom, non-tech companies are being hit by the global economic slowdown caused by monetary tightening in the United States and Europe.

The NDC revealed that the leading index, which forecasts economic conditions over the next six months, declined by 0.47% to 101.84. This was attributed to negative cyclical movements in construction area, business confidence, labor inflow, and money supply.

The central bank's selective credit controls introduced in September have proven effective in cooling down the overheated housing market.

In contrast, semiconductor equipment imports, export orders, and domestic stock indices rose, reflecting healthy momentum. The NDC reported that the coincident index, which reflects the current economic situation, was relatively flat, declining by 0.004% to 104.1. While public utility usage and retail, wholesale, and restaurant revenues weakened, exports, overtime hours, manufacturing sales, and imports of machinery and electrical equipment increased.

The NDC noted that major global research institutions have recently upgraded their forecasts for global GDP growth next year, which will benefit global trade and Taiwan's exports.

A stronger global economy would support final demand for goods and services, the council said. Additionally, major US tech giants have indicated they will spend more on developing AI applications next year, and this megatrend is expected to lead to robust business growth for Taiwanese companies in the AI supply chain.

However, Taiwan needs to remain vigilant about uncertainties related to geopolitical tensions and US-China tech rivalry and trade disputes.

[Copyright (c) Global Economic Times. All Rights Reserved.]