Taiwan’s exports eked out growth in August helped by demand for technology products, though shipments to China dropped on economic woes there and the government said the outlook was clouded by inflation, war in Ukraine and Sino-US tensions.

Exports rose 2 per cent in August from a year earlier to $40.34 billion, the Ministry of Finance said on Wednesday, a historic high for the month and up for the 26th consecutive month.

That was, however, much slower than the 14.2 per cent rise recorded in July, and below a forecast for a 9.5 per cent increase in a Reuters poll.

The ministry said technology demand fuelled the growth, but added that consumer spending was gradually slowing due to global inflation pressure and monetary policy tightening, citing “more conservative purchasing intentions by manufacturers”.

MasterLink Securities Investment Advisory analyst Anita Hsu said signs of the deterioration of Taiwan’s economy were getting clearer and clearer.

“I am afraid that the rest of this year will get worse and worse,” she added.

Exports to China, Taiwan’s largest trading partner, fell an annual 9.9 per cent to $15.12 billion in August, after a 3 per cent expansion in July, in a demonstration of the economic problems there.

China’s exports and imports lost momentum in August with growth significantly missing forecasts as surging inflation crippled overseas demand and fresh COVID curbs and heatwaves locally disrupted output.

Overall, Taiwan’s exports of electronics components in August rose 12 per cent to $17.05 billion, with semiconductor exports jumping 14.3 per cent from a year earlier.

Many companies expect global chip shortages to last at least for the rest of the year, which will continue to bolster Taiwanese semiconductor firms’ order books even as demand for some consumer electronics weakens.

Taiwanese chipmaker United Microelectronics Corp (UMC) on Tuesday reported a 34.9 per cent on-year surge in August sales.

Firms such as TSMC, the world’s largest contract chipmaker, are major suppliers to Apple Inc and other global tech giants, as well as providers of chips for auto companies and lower-end consumer goods.

Fitch Ratings said on Wednesday that while external demand for Taiwan’s high-tech exports was likely to fall, it should also “stay robust”.

The finance ministry warned of uncertainties ahead because of high global inflation, Russia’s invasion of Ukraine and the “China-US technology war”, even as it expected sustained chip demand.

Ministry official Beatrice Tsai said trade during the busy season, traditionally the months leading up to Christmas, would probably not be as strong as previous years.

August exports to the United States were up 2.3 per cent, much slower than the 24.8 per cent jump recorded the previous month.

Taiwan’s August imports rose 3.5 per cent to $37.35 billion, also a record high for the month but worse than economists’ expectations of a 7.1 per cent increase, after a jump of 19.4 per cent in June.

Taiwan could see September exports in a range of a 3 per cent contraction to a 1 per cent expansion from a year earlier, the finance ministry said.

Central Bank Stimulus: The head of Taiwan’s central bank said on Wednesday that external demand momentum will slow next year and an expansionary fiscal policy should be adopted to stimulate domestic demand.

The central bank will also adopt an appropriate monetary policy in a timely manner, but Taiwan should not be guided by the US Federal Reserve’s monetary policy structure and decision-making, governor Yang Chin-long told a forum.

Taiwan’s export-reliant economy has been supported by a global shortage of semiconductors that has filled the order books of the island’s chip-makers. But exports have begun loosing steam on flagging consumer demand in major markets China, the United States and Europe.

While the economy last year grew 6.45 per cent, the fastest since it expanded 10.25 per cent in 2010, it is expected to grow more slowly this year, hit by COVID-19 lockdowns in China and the impact of the war in Ukraine. Taiwan’s statistics agency last month lowered its gross domestic product forecast for 2022 to 3.76 per cent, down from a 3.91 per cent growth forecast in May, and trimmed its export outlook for the year.

Yang, in comments published on the central bank’s website, said this year and next, Taiwan’s economic growth would slow, but compared with major economies, it would remain “steady”, adding that inflation next year should fall back to less than 2 per cent.

But Taiwan’s economy is different to that of the United States, as are their monetary policy considerations, so the central bank should not be guided by the US Federal Reserves’ policy structure, he said.