Confidence in the local economy weakened due to geopolitical concerns surrounding Russia’s invasion of Ukraine, and a rate hike cycle launched by the world’s major central banks, a survey by Cathay Financial Holdings Co (國泰金控) showed on Wednesday.
The survey of 19,590 Cathay Life Insurance Co (國泰人壽) and Cathay United Bank (國泰世華銀行) clients conducted from April 1 to 7 showed that 46.4 percent of respondents believed the local economic situation would deteriorate over the next six months, while 29.9 percent thought it would improve.
The economic optimism index for the next six months stands at minus-16.5 this month, down from minus-1.7 from last month.
Photo: CNA
The optimism index for the current economic climate also moved lower to minus-16 this month from minus-0.2 last month, the survey showed.
Cathay Financial said that Russia’s invasion of Ukraine, which began on Feb. 24, has created uncertainty in the global economy.
Decisions by central banks to tighten monetary policies and retrieve funds from markets had also cast a shadow.
The war in Ukraine has resulted in sanctions being imposed against Moscow, a move that has sent ripples through global agricultural and commodity markets, adding upward pressure to inflation, Cathay Financial said.
The US Federal Reserve last month announced the first of several expected rate hikes by raising its key interest rate by 25 basis points, and hinted at six further increases to follow, with 50 basis points proposed for its meeting next month.
Taiwan’s central bank followed the Fed by raising interest rates by 25 basis points last month, its first increase in more than 10 years.
Cathay Financial said that a spike in domestically transmitted COVID-19 cases had additionally dampened consumers’ willingness to spend, leading to a fall in confidence in the local economy in this month’s survey.
As a result, the index gauging willingness to purchase big-ticket items, such as vehicles, fell sharply to zero from 10.8 last month.
The index assessing the willingness to buy property also dropped from minus-46 to minus-52.1, its lowest since May 2019, reflecting the effect of the central bank’s rate hike.
The employment optimism index for the next six months fell to minus-15.8 from minus-4.9 last month, while the index gauging the state of the job market also moved lower to minus-12.1 from minus-6.1.
The downbeat sentiment spread to the stock market, with the optimism index for share prices falling to 2.9 from 8.1, while the index gauging investors’ willingness to take risks also dropped to 12.0 from 15.0.
The latest survey found that respondents estimated Taiwan’s economic growth would hit 3.3 percent this year, down from 3.36 in last month’s survey, with 81 percent expecting economic growth of 2 percent or higher.
In the survey, 27.7 percent of respondents were concerned that growing global inflationary pressure would undermine demand and hurt Taiwan’s export-oriented economy, while 22.1 percent expressed concern that an increase in local COVID-19 cases would slow economic growth.
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