The central bank is to consider pre-emptive measures at its policy meeting next week to handle repercussions from the COVID-19 outbreak, Governor Yang Chin-long (楊金龍) told the legislature yesterday.
Yang made the statement when asked by lawmakers if he would follow global central banks and lower borrowing costs to support economic growth.
“Economic growth takes a backseat to the stability of the financial system and consumer prices on my list of concerns,” the governor said, adding that targeted fiscal tools are more effective in fostering growth.
Photo: Wang Yi-sung, Taipei Times
However, Yang said that he understood why central banks in other nations made pre-emptive rate cuts in response to the fast-spreading COVID-19 and he would discuss the matter with board members in a policy meeting on Thursday next week.
Yang, who has a doctorate in economics, said that the US Federal Reserve might make further rate cuts after a similar move last week to calm market anxiety that had little long-term effect.
Wall Street fell nearly 6 percent overnight, adding to a 20 percent correction in less than a month, following the WHO’s declaration of COVID-19 as a pandemic.
Likewise, the TAIEX yesterday shed another 4.33 percent to 10,422.32 with a cumulative retreat of 14 percent since China locked down its Hubei Province, at the center of the outbreak, on Jan. 23.
Taiwan’s GDP growth might slip below 2 percent if world governments fail to contain the outbreak by June, Yang said.
The board meeting would also update the bank’s forecast for the nation’s economy and consumer prices.
The outbreak appears to weigh on economic and consumer activity beyond the current quarter, as infections sweep across Europe and escalate in the US, the governor said.
“The situation looks quite serious and Taiwan is taking a hit through trade channels as well as a sharp decline in consumer spending,” Yang said.
However, it is unlikely that COVID-19 would evolve into a world crisis like the global financial storm in 2008 that pushed Taiwan’s GDP to a recession and put many people out of work, he said.
In other news, Taiwan looks set to be placed on the US currency watch list next month when US policymakers review trade deficit figures, Yang said.
Taiwan could have met two of the three criteria — retaining a trade surplus of more than US$20 billion and a current account surplus accounting for more than 3 percent of GDP, he said.
Taiwan could avoid the label if the US alters its criteria, which is possible, he said.
A spot on the currency watch list suggests currency intervention on the part of the central bank and could lead to punitive measures from Washington.
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