The central bank yesterday kept its rediscount rate steady at 1.375 percent for the 13th consecutive quarter, as the nation’s economy showed resilience amid lingering global uncertainty.
The move was in line with market expectations, despite rate cuts by other central banks, as Taiwan has benefited from firms rerouting trade to avoid tariffs on Chinese goods.
“We now expect GDP growth to reach 2.4 percent this year and slow to 2.34 percent next year, as exports have fared better than expected,” bank Governor Yang Chin-long (楊金龍) told a news conference in Taipei after a quarterly board meeting.
Despite its heavy reliance on China, Taiwan has thus far benefited from the US-China trade row, as firms based in China are moving production home and trade with the US has increased, Yang said.
The development runs counter to earlier predictions by research institutes at home and abroad that Taiwan would be hit hard by protectionist tariffs, as more 50 percent of its exports are destined for the US and China.
Trade rerouting would significantly boost private investment, which would help mitigate the effect of slowing external demand and could help absorb excessive savings and reduce negative output, Yang said.
As of yesterday, 140 firms had pledged to move facilities to Taiwan, with investment totaling NT$592.6 billion (US$19.1 billion), Ministry of Economic Affairs data showed.
Yang shrugged off concerns that the bank’s decision would attract hot money and encourage currency speculation.
Capital inflows were evident this month, but local shares saw relatively high dividend yields, which accounted for the capital influx, he said.
“The central bank has a full grasp of capital movements and would take action to stem any abnormality it spotted,” Yang sad.
The New Taiwan dollar gained 1.29 percent this month and closed yesterday at NT$31.006 against the US dollar, making it the strongest currency in Asia next to the Thai baht.
The NT dollar remains competitive, Yang said.
In other developments, the central bank on Wednesday fined state-run Taiwan Business Bank (TBB, 台企銀) NT$1 million for granting grace periods on luxury home loans in contravention of regulations.
Luxury homes — valued at NT$70 million or more in Taipei, NT$60 million in New Taipei City and NT$40 million elsewhere — do not qualify for a grace period and require a down payment of at least 40 percent.
TBB dodged the restrictions by evaluating a Kaohsiung apartment block below the market value at NT$30 million, allowing buyser to quality for grace periods.
Yang yesterday said he has no opinions about the property market except that loose lending practices could upset the stability of the nation’s financial system.
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