The Cabinet and legislature will discuss stimulus measures next week to bolster the economy, as the sovereign-debt crisis in Europe and a growth slowdown in China hurt exports and crimp expansion.
President Ma Ying-jeou (馬英九) has ordered the Cabinet to study possible fiscal measures, said a Cabinet official who asked not to be identified, citing lack of authorization to speak on the record.
The proposals will be discussed at an extraordinary meeting scheduled for Tuesday, the official said. The plan was earlier reported in the Chinese-language Commercial Times, which also said Premier Sean Chen (陳冲) would consider whether to increase public construction expenditure and the Cabinet would examine next year’s budget for possible stimulus measures, without saying where it got the information.
Taiwan joins nations from China to Brazil in coming under pressure to shield their economies as the global recovery falters, with the Asian Development Bank saying yesterday that policymakers may need to deploy more fiscal and monetary measures. Taiwan in May cut its GDP growth forecast to 3.03 percent from 3.38 percent after GDP rose at the weakest pace since 2009 in the first quarter from a year earlier.
“Growth is still a major concern in the region and outlook is unlikely to turn soon,” Chong Wee-khoon (張偉勤), a fixed-income strategist at Societe Generale SA in Hong Kong, wrote in a note yesterday. “We see broader easing pressure coming.”
The central bank left interest rates unchanged at 1.875 percent for a fourth straight meeting last month.
Its scope to reduce borrowing costs is hampered by inflation, which accelerated to 1.77 percent last month. Price pressures may rise in the second half of the year after damage to crops from rainstorms and planned electricity tariff increases.
However, Taiwan’s overnight rate dropped for the sixth day yesterday, the longest decline since May 2009, on speculation the central bank would cut borrowing costs to help reverse slowing economic growth.
The overnight interbank lending rate slipped two basis points to 0.407 percent, the lowest since March 27, according to a weighted average compiled by the Taiwan Interbank Money Center.