The government’s business climate monitor last month remained “green” for the third straight month, but it might start to feel the effects of an outbreak of COVID-19 in China from this month, the National Development Council (NDC) said yesterday.
The barometer lost two points to 25, allowing the climate signal a third consecutive green light, which indicates steady expansion of the economy.
However, things could turn negative as the epidemic starts to weigh on economic gauges, the council said.
“The picture looks increasingly gloomy ahead,” NDC research director Wu Ming-huei (吳明蕙) told a media briefing in Taipei.
The disease has already weakened business confidence and pushed export orders into contraction, she said.
The council uses a five-tier system to portray 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.
As local companies depend heavily on producing intermediate goods bound for China, the US and other end markets, the ongoing supply chain disruptions in China have been wreaking havoc on their operations, Wu said.
Dozens of Chinese cities remain on lockdown, obstructing labor recruitment and the supply of materials used in electronic components, she said.
The supply chain disruptions would dampen Taiwan’s trade performance, she added.
On the domestic front, people have avoided going out due to fear of contracting the disease and the weak sentiment has subdued sales at restaurants, department stores, hotels and other facilities, Wu said.
Wholesale and retail sales might see a business decline of NT$71.1 billion (US$2.3 billion) this month alone, she said.
The ongoing epidemic poses a bigger threat for the global economy than the SARS pandemic in 2003, based on the number of confirmed cases, Wu said.
An index of leading indicators, which aims to predict the economic situation in six months, shrank 0.11 percent to 101.63 as export orders, net labor accession rate and money supply all had negative cyclical movements from one month earlier, the council said.
An index of coincident indicators, which reflects the economic situation, grew 0.28 percent to 101.27, aided by better industrial production, imports of electrical machinery and power consumption data, it said.
Hopefully, local firms such as flat-panel suppliers could benefit from order transfers if the disease situation intensifies in China and South Korea, Wu said.
The virus could prompt more Taiwanese firms to adjust their deployment strategy and diversify the locations of their manufacturing bases, Wu said, adding that Taiwan could emerge as a good investment destination.
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