The service sector has not yet emerged from a slump amid the COVID-19 pandemic, although the rate of decline eased last quarter, the Commerce Research Institute (商業發展研究院) said yesterday.
The coincidental cyclical composite index for the service industry continued to fall last quarter and did not bottom out in October last year as had been expected following the launch of the government’s Quintuple Stimulus Voucher program, the Taipei-based research body said.
The retreat persisted in January, although the leading cyclical composite index has been rising since July 2020, indicating that economic development is uneven, the institute said.
The findings reflect soft domestic demand, which has persisted amid COVID-19 scares, geopolitical conflicts and extreme climate factors that might continue to be a drag on the economy, it said.
The shadow of “stagflation” — a situation of high inflation and unemployment, and slow growth — looms large after Russia invaded Ukraine on Feb. 24, adding to the rise in energy and raw material prices, it said.
While Taiwan had impressive GDP growth last year thanks to strong manufacturing activity and exports, private consumption remained weak, the institute said.
That is because the service industry has been hit hard by pandemic restrictions, it said.
Government bailout and stimulus programs provided short-term relief, but failed to induce industrial transformation or upgrade so service providers could become more resilient and competitive, it said.
Australia, Canada, the EU, Japan and the US have imposed economic sanctions on Russia, putting the world at the most risk of stagflation since the energy crisis of the 1970s, it said.
Taipei should quickly draw up plans to offset lost imports to maintain the supply-demand balance and work closer with the private sector amid a digital transformation, and the move toward environmental, social and corporate governance business models, the institute said.
Overdependence on foreign markets should be reduced to bolster Taiwan’s economic resilience and make it less susceptible to external shocks, it said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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