ADVERTISEMENT

Taiwan Cuts 2020 GDP Forecast as Virus Seen Slowing Trade

The main uncertainties for the economy include the coronavirus outbreak and the ongoing trade talks between the U.S. and China.

Taiwan Cuts 2020 GDP Forecast as Virus Seen Slowing Trade
Employees talk as a gantry crane lifts shipping containers at the Kao Ming Container Terminal Corp. (KMCT) terminal at the Port of Kaohsiung in Kaohsiung, Taiwan. (Photographer: Billy H.C. Kwok/Bloomberg)  

(Bloomberg) --

Taiwan lowered its estimate for full-year growth as officials say the coronavirus outbreak is set to diminish production and consumption this year.

  • Gross domestic product will likely expand 2.37% this year, the statistics bureau said in a statement Wednesday. That compares to a previous government forecast of 2.72%.
  • The economy grew a revised 3.31% in the fourth quarter of 2019, versus an earlier reading of 3.4%

Key Insights

  • The main uncertainties for the economy include the coronavirus outbreak and the ongoing trade talks between the U.S. and China, officials said in the statement.
  • The virus has led to lockdown and a delay in post-new year restart in China and control measures imposed by other countries. The additional high degree of uncertainty affecting normal economic activities, including production, consumption and trade, will drag down global economic performance and have a negative impact on foreign trade. But when the virus is brought under control in the future and supply-chain production returns to normal, export momentum will pick up: statement
  • Virus could cut GDP growth by up to 0.5 ppt, according to Chu Tzer-ming, Minister of the Directorate-General of Budgeting, Accounting and Statistics,
  • The impact of the virus on private consumption will be less than during SARS mainly due to the rise of e-commerce and because of greater spending from many Taiwanese businesspeople unable to return to China: Chu
  • “As long as Taiwan continues to be shielded from the direct impact of the coronavirus, exports and industrial production should pick up after 1Q and compensate for some of the reduced demand due to factory closures,” said Gary Ng, Natixis SA economist for Asia Pacific. “Meanwhile, investments should continue to flow into Taiwan and the short term disruption may only disrupt the trend but won’t halt it.”
Taiwan Revised 2020 Forecasts
UpdatedPrevious
GDP2.37%2.72%
CPI0.62%0.71%
Exports2.85%3.12%
Imports1.73%2.28%
Trade Balance$47.9b$49b
Private Consumption1.58%2.02%
Fixed Investment4.1%4.71%

Get More

  • “The government revised down 1Q and 2020 GDP forecast more than expected, which implies they expect the resumption of production in China may not go smoothly,” Anita Hsu, an economist with Masterlink Securities Investment Advisory in Taipei, said in a telephone interview. “But the impact of the virus isn’t as great on official forecasts for 2Q and beyond. So there is not much room for Taiwan Central Bank to adjust rates. Maybe the central bank will provide more liquidity to companies instead of a rate adjustment.”
  • Economists have cut their forecasts for the Chinese economy, as authorities continue to battle the coronavirus outbreak. Real gross domestic product is forecast to grow 5.8% this year, according to a Bloomberg survey, down from 5.9% forecast last month.
  • Officials in Taiwan warned last week that the virus could mean a burgeoning revival of the island’s exports may be short-lived; China is Taiwan’s largest trading partner.
  • Taiwan’s government is making moves to minimize the impact of the outbreak on the economy. After barring all arrivals from mainland China, Hong Kong and Macau, officials are discussing relief measures, including possible subsidies, for the worst-hit sectors, such as transport and hospitality.
  • Taiwan has reported 18 confirmed cases of the coronavirus so far.

--With assistance from Cindy Wang and Miaojung Lin.

To contact the reporters on this story: Debby Wu in Taipei at dwu278@bloomberg.net;Samson Ellis in Taipei at sellis29@bloomberg.net

To contact the editors responsible for this story: John Liu at jliu42@bloomberg.net, James Mayger

©2020 Bloomberg L.P.

Opinion
Taiwan Exports Plummet as Coronavirus Threatens Trade Recovery