Here’s one more thing Taiwan doesn’t want to share with China: slowing economic growth.
Perng Fai-nan, Taiwan’s central bank governor said Thursday that the island will have a hard time hitting its economic growth forecast this year. The less-than-upbeat assessment follows the election of a new pro-independence government in Taipei.
While taking questions from lawmakers in parliament, Perng also raised the possibility of an interest rate cut later this month. However, he added they may have a limited effect on boosting the economy due to Taiwan’s reliance on exports to drive growth.
Last month, the new Taiwan government lowered its annual growth outlook for the second time. It now expects the economy to grow 1.47% this year, after a year-on-year contraction in the first quarter.
Taiwan has been a bellwether for global technology demand because it manufactures many components used in computers and cellphones. However, the tech sectors have been hit hard by the global economic weakness.
Exports of other Asian economies, such as South Korea and China, have been contracting, Perng said.
“We must redouble our efforts,” he said, adding that he was “not optimistic” about Taiwan’s economic outlook for 2016.
However, fiscal policy would be more effective in supporting growth than monetary policy, said Perng.
“If rate cuts can solve the exports problem that would be simple,” he said.
Each of the last two times the central bank held a policy meeting it lowered the discount rate by 12.5 basis points. It holds its quarterly policy meeting March 24.
Categories: Asia Unhedged