Central bank Governor Yang Chin-long (楊金龍) yesterday said that it is too early to bet on GDP growth in Taiwan this year, as the bottom is yet to come amid the COVID-19 pandemic.
Yang sounded more cautious than other financial and economic officials, who earlier voiced confidence about growth of more than 1 percent.
“I cannot say for sure that the nation will log a GDP growth of at least 1 percent this year, as I don’t see the bottom yet,” Yang said, when asked at a meeting of the legislature’s Finance Committee to weigh the economic fallout of the nation’s outbreak.
Taiwan, as a small and open nation, is taking a blow from crimped economic activity around the world, Yang said, adding that nonessential businesses in many countries remain closed to help stop the spread of the virus.
Yang’s caution contradicted assurances given earlier by ministers of the Ministry of Finance; the Ministry of Economic Affairs; the Directorate-General of Budget, Accounting and Statistics; and the National Development Council.
Taiwan’s export-reliant economy expanded 1.45 percent last quarter from a year earlier, but contracted 5.91 percent at a seasonally adjusted, annualized rate, which might remain negative this quarter and usher in a technical recession.
The economy is still losing steam, although Taiwan has put up a good fight against the virus, Yang said.
A total of 22 research institutes at home and abroad have made projections for Taiwan, with nine betting on a mild recession, the governor said.
The central bank would update its forecast next month, when board members meet to discuss the policy rate, Yang said.
Taiwan is expected to have a swoosh-shaped rebound, featuring a steeper slope on the downside and a partial bounce followed by a more gradual recovery, Yang added.
Economists have said that reopening economies is not likely to bring a quick return to normalcy because social distancing practices, lingering concern over health and a desire to replenish emergency savings would offset some pent-up demand.
Many have also said that the worst might be over this quarter, but Yang said that too much uncertainty remains to reach conclusions.
The governor said that he shares that US Federal Reserve’s misgivings about a policy of negative interest rates to stimulate an economy, adding that there is room for rate cuts in Taiwan, if necessary.
The government can take more aggressive steps, such as a distribution of consumption vouchers to bolster private consumption, which declined 0.53 percent in the first quarter, he said.
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