Standard Chartered Bank Taiwan Ltd (渣打台灣銀行) yesterday trimmed its forecast for the nation’s GDP growth this year to 1.9 percent, from 2.2 percent it predicted in December last year, due to the COVID-19 outbreak.
That was a comparatively smaller reduction than those for neighboring markets, with the bank predicting that South Korea’s economic growth would slow from 2.1 percent to 1.8 percent, Singapore’s would dip from 1.4 percent to 0.8 percent and Hong Kong would decline from minus-1.5 percent to minus-2.4 percent.
“It seems that Taiwan’s economy would still outperform neighboring countries amid the virus fears, thanks to the nation’s vibrant manufacturing activity and relief measures,” Standard Chartered Taipei-based senior economist for Northeast Asia Tony Phoo (符銘財) told the Taipei Times by telephone.
The outbreak has caused supply-chain disruptions in Asia, especially Chinese semi-finished goods, but Taiwan, being a major player in the original equipment manufacturing business, is expected to better handle the situation, as local companies find alternative suppliers and even gain new orders, Phoo said.
As NT$40 billion (US$1.33 billion) of a government-proposed NT$60 billion special relief budget has been earmarked to aid affected sectors, such as tourism and restaurants, it is expected to help reduce the negative effects to the economy, he added.
“We think it would be similar to the situation during the US-China trade tensions. Due to a deep connection with China, Taiwan was once predicted to suffer badly amid the trade dispute, but it turned out to be a major beneficiary,” Phoo said.
South Korea, which also has strong manufacturing activity, is likely to face mixed effects from the outbreak, as companies might gain new orders transferred from Chinese firms, but also face weaker consumer demand, he said.
By comparison, Singapore and Hong Kong, whose economies are mainly concentrated on service sectors such as finance, shipping, aviation and tourism, are likely to suffer more from the outbreak, as companies cannot simply find new customers, he added.
If the outbreak in China could be contained by the end of this month, Asian economies could improve slightly in the second quarter and see a V-shaped rebound in the third quarter, when consumers would be willing to make big-ticket purchases, Phoo said.
However, if the outbreak lasts longer, its effects would be more serious, he said.
“There is no substitute for consumer demand in China and the semi-finished goods made there. If they continue to be weak due to the virus crisis, we would all be affected negatively,” Phoo said.
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