The government’s business climate monitor was “green” for the second month in a row in December, indicating a stable economy, which might take a hit in the short term as the coronavirus outbreak in China disrupts electronics supply chains, the National Development Council (NDC) said yesterday.
The barometer gained 3 points to 27 on the back of improving manufacturing sales and industrial output, but the worsening epidemic has halted operations at tens of thousands of Taiwanese firms based in China with no quick solution in sight, the council said.
“The virus will deal a bigger blow to the world’s economy than SARS in 2003, as China has gained weight in global GDP,” with a 16 percent share last year compared with 4 percent in 2003, NDC research director Wu Ming-huei (吳明蕙) told a media briefing in Taipei.
A worse slowdown in China raises uncertainty regarding Taiwan’s export outlook, with manufacturers in the supply chains of Chinese technology brands being affected, as well as those dependent on Chinese consumers, Wu said.
Taiwan’s private consumption declined 1.1 percent at the height of the SARS outbreak, but rebounded 5 percent after the fatal virus was brought under control, Wu said.
The nation is better prepared this time as evidenced by the small number of confirmed cases in Taiwan so far, but short-term disruptions remain inevitable, the council said.
“Companies will ramp up production after resuming normal operations... The negative impact should be short-lived and is likely to be less formidable,” Wu said.
The council uses a five-tier system to depict the state of the nation’s economy, with “green” indicating steady growth, “red” suggesting overheating and “blue” signaling a recession. Dual colors indicate a transition.
The pickup in December reflected stable growth in industrial output and manufacturing sales, as well as healthy wholesale, retail and restaurant operations, the council said.
The index of leading indicators, which aims to predict the economic scene six months from now, rose 0.07 percent to 102.15, it said.
The indices for imports of semiconductor equipment, business confidence and new construction floor space all improved, but the indices for export orders and net accession data moved downward, it said.
The index of coincident indicators, which reflects the current economic situation, grew 0.51 percent to 101.4, it said, attributing the upturn to better industrial production, exports and manufacturing sales.
However, total power consumption and non-farm payrolls shrank a bit, the council said.
The epidemic’s effect on Taiwan’s economy is likely to be short-lived, Taiwan Institute of Economic Research president Chang Chien-yi (張建一) said yesterday.
The institute last month raised its forecast for Taiwan’s economic growth to 2.67 percent, 0.22 percentage points higher than the estimate it made in November last year.
Chang said that the epidemic could chip away at investment confidence and have a major effect on specific sectors, including tourism, travel and transportation.
The epidemic would only slightly affect the technology and manufacturing sectors, because domestic factories are still running normally, although some Taiwanese manufacturers in China could fall behind schedule, he said.
Additional reporting by CNA
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