TAIPEI, Taiwan — The appreciation of the new Taiwan dollar is expected to be limited in the coming year because of projected low profit margins for Taiwanese firms caused by the high price of imports, a local analyst said at a seminar.
The new Taiwan dollar will not appreciate dramatically because Taiwan’s import price index has been much higher than the export price index, increasing the cost of goods and narrowing the profit margins of Taiwanese companies, said Wu Chung shu, an economic research fellow at Academia Sinica.
In the short term, the appreciation of the local currency could be absorbed to a manageable degree by Taiwanese vendors, said Wu, who is also the dean of National Dong Hwa University’s College of Management in Hualien.
But Taiwanese vendors will have to improve productivity over the long term to deal with the appreciation. Otherwise, he said, they will be forced to withdraw from the markets they compete in, he added.