The central bank yesterday cut its policy rates by 12.5 basis points for the fourth time in three quarters on concerns that growing uncertainty over the global economy might weigh on economic growth.
The latest rate cut came one week after the UK voted to leave the EU, a move that has jolted global financial markets with its economic spillover expected to persist in tandem with the exit process.
“A loose monetary policy is merited, because the increase in global uncertainty might impact the nation’s GDP showing,” central bank Governor Perng Fai-nan (彭淮南) told a news conference after a two-hour board meeting.
Photo: Lo Pei-der, Taipei Times
Starting today, the rediscount rate is to drop to 1.375 percent, the collateralized loan rate to 1.75 percent and the unsecured loan rate to 3.625 percent.
Mixed economic data prompted the rate cut, said Tony Phoo (符銘財), a Taipei-based economist at Standard Chartered Bank.
However, he added that the economy might have bottomed in the first quarter and started on a slow course of recovery in the second quarter, after the purchasing managers’ index, industrial output and leading economic indicator series registered positive cyclical movements in May.
While Taiwan’s exports to the UK accounted for a modest 1.4 percent of total exports last year, with the rest of the EU accounting for 7.1 percent, Perng said the EU is the US’ and China’s second-largest trading partner, suggesting an indirect spillover, although its magnitude is not clear yet.
Together, the US and China account for more than 50 percent of Taiwan’s exports, Ministry of Finance data showed.
The central bank would adopt macro-prudential measures, if necessary, to help maintain financial stability, but it would also require the government to implement fiscal expansion and structural reform to spur economic growth, Perng said.
South Korea, which relies heavily on exports, like Taiwan, has recorded better GDP growth because its government has introduced five stimulus packages during the past 12 months, Perng said.
Higher tax rates and lower debt allow the South Korean government to be more aggressive with its spending, he said.
In the absence of structural reform, Taiwan would suffer a long period of stagnation due to China’s economic rebalancing as that nation seeks to shift its growth driver from investment and exports to domestic consumption, he said.
“Consequently, China imports less from Taiwan, which in turn sees its exports declining,” Perng said, adding that the trend has constrained employment and wage growth in Taiwan.
Taiwan has emerged as the largest victim of China’s rebalancing, due to its heavy economic dependence, although all of China’s trading partners took a hit, except New Zealand, which has benefited from robust kiwifruit and milk sales, Perng said.
NO HUMAN ERROR: After the incident, the Coast Guard Administration said it would obtain uncrewed aerial vehicles and vessels to boost its detection capacity Authorities would improve border control to prevent unlawful entry into Taiwan’s waters and safeguard national security, the Mainland Affairs Council (MAC) said yesterday after a Chinese man reached the nation’s coast on an inflatable boat, saying he “defected to freedom.” The man was found on a rubber boat when he was about to set foot on Taiwan at the estuary of Houkeng River (後坑溪) near Taiping Borough (太平) in New Taipei City’s Linkou District (林口), authorities said. The Coast Guard Administration’s (CGA) northern branch said it received a report at 6:30am yesterday morning from the New Taipei City Fire Department about a
IN BEIJING’S FAVOR: A China Coast Guard spokesperson said that the Chinese maritime police would continue to carry out law enforcement activities in waters it claims The Philippines withdrew its coast guard vessel from a South China Sea shoal that has recently been at the center of tensions with Beijing. BRP Teresa Magbanua “was compelled to return to port” from Sabina Shoal (Xianbin Shoal, 仙濱暗沙) due to bad weather, depleted supplies and the need to evacuate personnel requiring medical care, the Philippine Coast Guard (PCG) spokesman Jay Tarriela said yesterday in a post on X. The Philippine vessel “will be in tiptop shape to resume her mission” after it has been resupplied and repaired, Philippine Executive Secretary Lucas Bersamin, who heads the nation’s maritime council, said
REGIONAL STABILITY: Taipei thanked the Biden administration for authorizing its 16th sale of military goods and services to uphold Taiwan’s defense and safety The US Department of State has approved the sale of US$228 million of military goods and services to Taiwan, the US Department of Defense said on Monday. The state department “made a determination approving a possible Foreign Military Sale” to the Taipei Economic and Cultural Representative Office in the US for “return, repair and reshipment of spare parts and related equipment,” the defense department’s Defense Security Cooperation Agency said in a news release. Taiwan had requested the purchase of items and services which include the “return, repair and reshipment of classified and unclassified spare parts for aircraft and related equipment; US Government
More than 500 people on Saturday marched in New York in support of Taiwan’s entry to the UN, significantly more people than previous years. The march, coinciding with the ongoing 79th session of the UN General Assembly, comes close on the heels of growing international discourse regarding the meaning of UN Resolution 2758. Resolution 2758, adopted by the UN General Assembly in 1971, recognizes the People’s Republic of China (PRC) as the “only lawful representative of China.” It resulted in the Republic of China (ROC) losing its seat at the UN to the PRC. Taiwan has since been excluded from