Irrational depreciation of currencies by countries hoping to boost exports might trigger protectionism and global disputes, the head of a nonprofit training and research foundation warned yesterday.
Shea Jia-dong (徐嘉棟), chairman of the Taiwan Academy of Banking and Finance, said that in the face of the global economic crisis, government efforts to stimulate the economy by accelerating exports was not a commendable practice.
“Competing to depreciate currencies as a means to drive up exports will not only unleash international disputes, it might also trigger protectionism, which will do the faltering world economy a great disservice eventually,” Shea said.
He said Taiwan’s exports had slumped significantly over the past several months and with the prospects for exports bleak this year, many outside observers were pessimistic about the country’s’’ economic growth because Taiwan’s economy is heavily dependent on exports.
Amid the onslaught of the global financial crisis, exports had been the hardest-hit sector, Shea said. Exports plunged 44.1 percent last month from a year earlier, the Ministry of Finance said on Monday.
“Yet Taiwan is not a hopeless cause if it strives to stimulate economic growth by bolstering domestic consumption,” Shea said, adding that the government had been active in this area.
In Taipei trading, the NT dollar fell to its lowest level since September 2004 as Asian stocks sank on skepticism US President Barack Obama’s bank rescue program would be able to revive the world’s largest economy.
The NT dollar fell NT$0.034 to close at NT$34.001 against the US currency, the Taipei Forex Inc said. It touched NT$34.080, the weakest intraday level since September 2004.
Speculation that Taiwan’s central bank will intervene and weaken the local currency to aid exporters also weighed on the Taiwanese dollar. The currency fell in the final minutes of trading in the previous three days. Central banks intervene by buying and selling their currencies.
“The recent central bank intervention is consistent with what we’ve been seeing in the past few weeks,” said Wai Ho Leong, a regional economist in Singapore at Barclays Plc, the third-biggest foreign-exchange trader, adding that the NT dollar would remain weak due to “quite a bit of negative news out of Taiwan recently.”