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Virus fears lead DBS to raise Taiwan GDP growth forecast 'modestly'

ROC Central News Agency

01/31/2020 08:06 PM

Taipei, Jan. 31 (CNA) Amid concerns over the spread of a new type of coronavirus that originated in Wuhan, China's Hubei Province, Singapore-based DBS Group said on Friday that it upgraded its forecast of Taiwan's gross domestic product (GDP) growth for 2020 "only modestly."

In a statement, Ma Tieying (馬鐵英), a senior economist at DBS Research, said the momentum of Taiwan's economy is expected to continue into 2020 from the fourth quarter of last year so the banking group decided to upgrade its forecast of GDP growth for this year.

However, after taking into account the possible impact of the Wuhan virus, Ma said, DBS decided to revise Taiwan's GDP growth from 2.0 to just 2.3 percent.

According to DBS, before the Wuhan virus outbreak and the spread of the 2019 novel coronavirus (2019-nCoV) infection around the world, the banking group had planned to upgrade Taiwan's GDP growth for 2020 to 2.5-3 percent.

"The latest outbreak of 2019-nCoV in mainland China poses a fresh risk to Taiwan's near-term growth outlook," Ma said in the statement.

While the stronger-than-expected growth momentum in the fourth quarter of 2019 justified an upward revision of Taiwan's 2020 GDP forecast, Ma said, "considering the new risk from 2019-nCoV, we are revising our forecast only modestly, to 2.3 percent from 2.0 percent."

In the fourth quarter, Taiwan largely benefited from better than expected domestic investment, private consumption and exports, the local economy grew 3.38 percent, compared with an earlier estimated 3.04 percent increase made in August.

Ma said China remained the largest buyer of Taiwan-made goods, accounting for 40 percent of Taiwan's total exports so if the Wuhan virus has an adverse impact on the Chinese economy, Taiwan's outbound sales are expected to be hurt.

Meanwhile, China also serves as the largest production base for many Taiwanese manufacturers. The Wuhan virus has prolonged China's Lunar New Year holiday and led to closure of many factories on the mainland, which is expected to hurt the production of many Taiwanese firms operating there.

Exports to China have only recently returned to positive growth since Nov. 19 due to the stabilization of the Chinese economy and the rise in demand for 5G applications, but "a renewed slowdown in the Chinese economy would threaten the near-term outlook for Taiwan's export recovery," Ma said.

In addition, Ma said the spread of the Wuhan virus is expected to directly impact Taiwan's consumption and tourism sectors since the public will reduce outdoor activities, as well as domestic and international travel, while confidence is also likely to take a toll from financial market jitters.

On Thursday, the first day the local financial markets resumed trading after a seven-day Lunar New Year holiday, the weighted index on the Taiwan Stock Exchange plunged 5.75 percent, and the Taiwan dollar fell 0.90 percent against the U.S. dollar before a mild rebound on both markets Friday.

The silver lining is that there is sufficient room for the Taiwan government to use fiscal stimulus measures to support domestic economic activities, Ma said.

He added that President Tsai Ing-wen (蔡英文) securing a second term and the ruling Domestic Progressive Party winning a majority in the Legislative Yuan in January elections should make it easier for the government to push through its policies.

In Taiwan, a total of nine confirmed Wuhan virus cases have been reported so far, including two domestic cases, while more than 9,600 coronavirus cases have been confirmed in China with at least 213 deaths reported, all in Hubei, as of Thursday.

Worldwide, almost 10,000 confirmed cases have been reported.

(By Wu Chia-jung and Frances Huang)


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