The central bank is cautious about the nation’s economic outlook this year amid slowing growth momentum, according to a report central bank Governor Perng Fai-nan (彭淮南) is set to present to the legislature’s Finance Committee today.
In a report delivered to the legislature on Friday, the central bank warned the nation’s economy is facing four major headwinds this year: weaker exports and imports, slowing private consumption growth, declining private investment and waning industrial production.
HEADWINDS
These four headwinds have slowed the economy’s growth momentum since the second half of last year, when the sovereign debt crisis in the eurozone drove down the global economy, the bank said.
Taiwan’s direct exports to the EU accounted for 9 percent of the nation’s overall outbound shipments, according to government data.
Exports to the EU fell by 2.5 percent year-on-year in the second half of last year and the eurozone debt problem also drove down shipments to foreign manufacturers and overseas Taiwanese companies in US and China, the report said, citing the Ministry of Finance’s data.
Compared with other major economies in Asia, including China, South Korea and Singapore, Taiwan’s export growth slowed the most during the second half, the bank added.
SECONDARY EFFECTS
The weaker external demand also led domestic technology firms to reduce capital expenditures, causing equipment imports and private investments to decline 20 percent and 11.23 percent year-on-year in the second half, while private consumption grew only 0.98 percent in the fourth quarter because of weak consumer confidence, the data showed.
Facing continuing uncertainties this year, the central bank said it would stay flexible and adjust monetary policy based on macroeconomic conditions, in an effort to maintain economic growth momentum, but with an eye toward stable consumer prices.
SOME GOOd NEWS
The good news is that Taiwan’s inflation has stayed “low and stable” for a long time, the central bank said.
Last month, the Directorate-General of Budget, Accounting and Statistics (DGBAS) forecast the nation’s headline inflation rate to increase 1.46 percent this year, slightly higher than a 1.42 percent growth recorded last year, but still lower than other major economies.
In the report, the central bank said it would maintain its “dynamically stable” strategy regarding the exchange rate of the New Taiwan dollar in an effort to maintain a stable financial system in Taiwan.
In the past few years, the NT dollar has appreciated when the headline inflation rate rose, and depreciated when the nation’s GDP growth slowed, the central bank said.
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