As the Eurozone continues to teeter on the brink, the global business climate remains lackluster. Domestically, Taiwan is beset with rising petroleum and electricity prices, a plummeting stock index, and glum consumer confidence. Yet bright spots do exist in the overcast economic landscape.

In this moment of uncertainty, CommonWealth Magazine looks at three of the most crucial issues for Taiwanese business: Will Taiwan's economy bounce back during the last two quarters of the year? Which export markets offer the greatest promise? Which sectors are hiring, and raising salaries?

Second-half Economic Forecast for Taiwan

What to watch for: Electronic components makers await new surge in consumer demand.

Taiwan's economic performance was nearly flat during the first half of the year, with growth of only 0.39 percent in the first quarter and just 0.77 percent in the second.

The government's Directorate-General of Budget, Accounting and Statistics (DGBAS) recently revised downward for the sixth time its forecast for annualized economic growth for 2012 to 3.03 percent, off 1.55 percentage points from the initial economic forecast for this year it published last August.

A number of private research institutes have also revised downward their economic forecasts for Taiwan, with a joint economic research team from Cathay Financial Holdings Co. and National Taiwan University breaking the critical psychological barrier of 3 percent, handing in a forecast of just 2.45 percent growth this year.

Economic performance was tepid in the first half, largely due to a decline in exports and an uncertain international situation.

Having recovered since the worst of the financial crisis, total export value once again posted negative growth. Exports to China, which account for 40 percent of the total, were particularly hard hit, contracting 10.2 percent from the previous year for the January through May period.

"Exports are undergoing a structural transformation as China's supply chain becomes more localized,” says Tsai Hung-kun, head of the Department of Statistics under the DGBAS.

The sharp decline of exports in real terms had an indirect influence on consumer spending, and faced with the double whammy of rising gas and electricity costs, private consumer spending has tended toward the conservative. The forecast for growth in consumer spending this year has consequently also been revised downward from its original 3.18 percent to 2.03 percent.

But there are some bright spots amid the gloom. International markets responded favorably to Spain's successful bond issue, taking the edge off some of the anxiety.

In domestic manufacturing, the Taiwan Institute of Economic Research's (TIER) forecast of industrial indicators was particularly optimistic about the prospects for electronic components manufacturers, who account for a massive share of Taiwan's overall manufacturing industry. The release of the Windows 8 operating system could potentially drive a new wave of demand in the second half of the year.

Barclays Bank maintains that Taiwan's tech sector is entering a period of cyclical growth and has held steady with its initial forecast of 3.5 percent growth for this year.

A report for the Chung-Hua Institution for Economic Research (CHIER) meanwhile notes that since the relaxation of restrictions on tourism from China, Chinese tourists have become a prime driver of growth in tourist visits, boosting the total value of service industry exports.

For six consecutive months the Council for Economic Planning and Development's (CEPD) color-coded monitoring indicators of the current domestic economic situation have shown blue, indicating sluggish performance. But perhaps with the “composite index of leading economic indicators” continuing to climb, a ray of hope will shine on the second half of 2012.

Which Taiwan Export Markets are Still Growing?

What to watch for: China cools, ASEAN heats up.

Taiwan's trade and investment are currently undergoing a structural transformation: whether in exports or in investment, the member states of the Association of Southeast Asian Nations (ASEAN) are the only markets still showing growth. Taiwan's trade and investment target has clearly turned from expanding “west” (into China) to “south” into ASEAN.

The latest statistics from the Ministry of Finance indicate that Taiwan's total exports declined five percent January-May, dragged down by declines in exports to major markets like China, North America, Europe and Japan while exports to the six ASEAN nations (Thailand, Singapore, Malaysia, Indonesia, Vietnam and the Philippines) showed the only growth at 6.2 percent.

What's more, with a total value of US$22.48 billion, exports to the ASEAN markets approach the numbers of Taiwan's biggest export market – China, at US$47.19 billion – and make the grouping Taiwan's number two export market, far eclipsing the island's US$13.25 billion in exports to the U.S.

Taiwanese investment is also in the midst of transition.

Ministry of Economic Affairs statistics show that amidst an overall decline of 15 percent in Taiwanese external investment during the January through April period, investment bound for the ASEAN six exploded 174 percent. Compared with declines in investment in the U.S. and China of 72 percent and 22 percent, respectively, it's clear to see where this is headed.

Businesses expanding their investment in the ASEAN nations are largely in the manufacturing, financial and insurance sectors.

Which Sectors Are Hiring?

What to watch for: Travel and tourism; IT technical services and development.

Despite global market unrest, the disruption to the local labor market has been limited.

In its most recent quarterly global outlook and prospects survey, global employment services agency Manpower Group indicates that employment prospects in Taiwan for the third quarter will be rosier than the rest of the Asia-Pacific region and the world in general, ranking second, behind only India.

Of more than 1,000 employers surveyed, 44 percent were planning on adding to their workforce in the third quarter, half planned no change, and just four percent were planning on reducing their workforce.

Staffers for the travel and tourism industry were in greatest demand. With the numbers of tourists from China multiplying and the arrival of peak tourism season during the third quarter, demand for new hires in the service industry is at an all-time high, says Terrence Liu, general manager of Manpower Services (Taiwan) Co. Additionally, the continued rise of online shopping and social media has prompted increasing demand for IT technical services and web development personnel.

A Council of Labor Affairs (CLA) survey of labor demand projections for late July across various industries indicates demand will be strongest in the service sector, with a net increase of 8,200 new job openings to be filled, followed by electronic components manufacturing, with a net 7,000 new jobs added. Wholesaling and retailing; lodging, food and beverages; computers and electronics; and the optical manufacturing industry will combine for a net 3,500-plus jobs added.

The CLA-published Employment Prospects Monthly for May notes that basic minimum wages rose broadly across most of the service sector during the first quarter, with those for professional technicians and technical services providers rising most sharply, on average 10.8 percent. In the industrial sector, wages in the fields of power generation and natural gas supply rose the most, averaging six percent.

The overall employment prospects in the financial, insurance and real estate sectors remain conservative, with little changed from the previous quarter, largely due to the European debt crisis and unresolved issues surrounding the capital gains tax.

Moreover, the blooming European debt crisis can be expected to drag down economic growth rates in major emerging markets, and a number of Taiwan's flagship export industries will see a knock-on effect. Currently, the manufacturing sector continues to lean toward “conserving the workforce, not shrinking it,” to keep them in position to handle future increases in new orders.

Translated from the Chinese by Brian Kennedy