Taiwan faces the longest slump in exports since 2008

Trade data out yesterday showed that exports continued to contract sharply in Feb16, by -11.9% (YoY). Combining Jan-Feb16, exports fell -12.4% on average, a slightly smaller rate compared to -13.9% in 4Q15. But this was largely due to the easing of commodity price declines. 

According to DBS research note, "excluding the price factors, we reckon that exports fell about -5% in the first two months of this year, a further drop compared to -4.1% in 4Q15. Whether measured in nominal or in real terms, the ongoing slump in exports is the longest seen since the global financial crisis in 2008-09."

The outlook ahead remains lackluster with the global financial market turmoil that occurred at the start of this year would depress business confidence, resulting in a delay of production/investment plans across the region in the near term. Beyond it, the recovery in exports is also likely to be modest as global growth is expected to remain at subnormal levels this year.

Sluggish trade and GDP data will continue pressure Taiwan's central bank (CBC). 

DBS further notes that GDP growth will remain negative (YoY) in 1Q16 with high chance that the CBC will cut rates at March's meeting, by another 12.5bps. Without clear signs about a 2Q16 recovery, the CBC will likely continue to ease at the subsequent meeting in June. The benchmark discount rate is projected to fall to 1.375% by the mid of this year.