Taiwan faces weaker growth prospects

The picture for the Taiwanese economy has changed a lot since the Q2 meeting. GDP growth dropped sharply in Q2 to 0.5% yoy from 3.4% yoy in Q1 on a significantly reduced contribution from net exports. There was no meaningful improvement in external demand thus far in Q3. 

Exports decelerated faster. The manufacturing PMI dropped to its lowest level in three years in August while industrial production remained on a downtrend.The sharp slowdown in mainland China's industrial and construction sectors (i.e. the secondary industry) has weakened Taiwan's exports, outweighing any improvement in trade with advanced economies. 

"Unfortunately, the latest data from mainland China have continued to disappoint. Its secondary industry's nominal GDP is expected to decelerate further to 1% in 2016 from 1.5% this year. This adds further downward pressure to Taiwan's growth prospects, on top of all the structural headwinds", says Societe Generale.