For finance officials around thethe globe, the figures of the past three months delivered one message: "panic."

On January 8, Central Bank governor Perng Fai-nan slashed the rediscount rate from 2.0% to 1.5%, the sixth reduction in four months and the second largest since a 75-basis-point cut less than a month before. It remains to be seen if lower interest rates will stimulate loans, boost investment and increase consumption, but the Bank of Taiwan's interest rate for a one-year NT-dollar CD slid below 1%, eliciting complaints from retirees, who depend on interest income.

The Central Bank's drastic measures have not been without justification. According to the Ministry of Finance, Taiwan's exports in December 2008 were only US$13.64 billion, down by 42% year-on-year and off for a fourth straight month, while imports plunged by 45% to US$11.78 billion. These were the steepest drops in history. But the worst is yet to come. The outlook for Q1 2009 looks grim.

Further analysis shows that the drop in exports for December was concentrated in high-tech products such as semiconductors, TFT-LCD displays, and consumer electronics. Breaking the figures down by destination, exports to mainland China and Hong Kong fell by an astounding 54.0% and those to the ASEAN-6 nations dropped by 46.0%, far worse than the figures for the US (23.5%) and Japan (21.9%).

Given that China and Southeast Asia are major production centers for Taiwanese companies, sluggish exports mean that Taiwanese businesses located overseas face serious headwinds. Former Straits Exchange Foundation chairman Chiang Pin-kung led a delegation to China in order to secure more funding and tax benefits for Taiwanese companies, because safeguarding the manufacturing lifelines of Taiwanese businesses is the only way to ensure that Taiwan's upstream and midstream goods will continue to survive in the marketplace.

The severity of the global economic downturn is evident from the cliff diving that took place in late 2008.

Despite the US subprime mortgage crisis that erupted at the end of 2007, Taiwan's exports grew 17.5% and 18.6% year-on-year in Q1 and Q2, and imports, inflated by oil prices that peaked at US$147 per barrel, grew by 26.0% and 19.2%. The annual averages actually looked good, with imports and exports showing positive growth as Taiwan posted a trade surplus of US$14.83 billion, but the year-end plunge has alarmed governments the world over.

This slowdown has triggered a surge in the unemployment rate.

According to a human resources survey of the Directorate-General of Budget, Accounting and Statistics, the number of unemployed in Taiwan was 507,000 in November 2008, up by 31,000 from October, and the jobless rate was 4.64%, a new high since 2002 and 2003 when the US tech bubble burst. Although the unemployment rate in Taiwan is not as bad as in Europe or North America, it is running higher than in the other Asian tigers (Singapore, Hong Kong, and South Korea), and could reach new heights around Chinese New Year.

The government has proposed numerous measures to mitigate unemployment, including the Retraining Program (in which those sent by their companies on unpaid leave are provided with NT$10,000 worth of job training), the Charitable Enterprise Program (in which corporations with layoff rates of less than 1% receive preferential loans), and other short-term and mid-term programs to encourage job retention and hiring. In addition, numerous domestic stimulus packages and 12 major construction projects have been launched.

When will the global economic crisis abate? When will exports and imports recover? Nobody can foretell. But if through this crisis we can once again review long-dormant economic development blueprints and re-start major construction projects, as well as institute a comprehensive social safety net, this will not only minimize the damage caused by the economic crisis, but may also bring us a bright future after the troubles are over.

2008 customs figures for imports and exports

Growth in exports in major regions

Unemployment rates in selected countries and regions