Back to list

Taiwan's interest rates to remain intact in 2019: Standard Chartered

2018/12/10 21:58:46

Taipei, Dec. 10 (CNA) Taiwan's central bank is expected to leave its key interest rates unchanged for 2019 because the global economy is expected to face some downside risks amid trade tensions between the United States and China, Standard Chartered Bank said on Monday.

In addition, uncertainty over the emerging economies is expected to make the central bank remain on alert over the global economic development and maintain its current monetary policy, the bank said.

In a conference held to forecast Taiwan's economy, Tony Phoo (符銘財), a senior economist for East Asia of Standard Chartered Bank, cited the minutes of the central bank's latest quarterly policymaking meeting held in late September as saying some directors and supervisors of the bank have adopted a cautious tone, fearing the local economy will slow down next year.

Phoo said with inflation likely to remain stable, the central bank is expected to leave interest rates unchanged for 2019 in a bid to maintain adequate liquidity and boost the economy.

In the September policymaking meeting, the central bank decided to leave interest rates unchanged, with the discount rate at 1.375 percent. It was the ninth consecutive quarter for the central bank to maintain its monetary policy.

At the end of last month, the Directorate General of Budget, Accounting and Statistics cut the estimate for Taiwan's gross domestic product (GDP) growth in 2018 by 0.03 percentage points from a forecast in August of 2.66 and downgraded its forecast for 2019 by 0.14 percentage points to 2.41.

Echoing Standard Chartered Bank, the DGBAS cited unfavorable external factors such as the Washington-Beijing trade dispute as a reason behind the downgrade in Taiwan's 2019 GDP growth forecast.

For its part, Standard Chartered Bank said Taiwan's GDP is expected to grow 2.5 percent in 2019, indicating a more upbeat mood than the DGBAS.

Phoo said the silver lining of the trade friction between the U.S. and China is that some Taiwanese investors based in China could relocate their investments to Taiwan to avoid the impact from the trade implications, so capital formation in Taiwan is expected to grow in 2019 from this year.

Phoo said that as Taiwan's government is coming up with measures to make more land available for industrial use, stabilize the power supply and increase the number of migrant workers, Taiwanese investors are expected to accelerate their pace of returning to the island.

Meanwhile, David Mann, chief economist for Standard Chartered Bank, said growth of the global economy is expected to moderate next year.

In addition to the on-going thorny trade issues, geopolitical tensions in Europe, China's adjustments in its fiscal and financial policies, and the volatility in international crude oil prices could affect the global economy, Mann said, but he added the slowdown is unlikely to be dramatic.

As for the U.S. Federal Reserve, Mann said it is expected to carry out a rate hike cycle at a stable pace. He added that the Fed is getting close to the end of the current rate hike cycle.

(By Chiu Po-sheng and Frances Huang)