Confidence in local economy improves in January

01/23/2021 05:42 PM
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CNA file photo
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Taipei, Jan. 23 (CNA) Confidence in Taiwan's economy is improving in January on the back of optimism toward global vaccine developments against the COVID-19 pandemic, according to Cathay Financial Holding Co.

The firm said that recent National Development Council (NDC) data shows a stable economic climate, flashing another green light in November, with the leading indicators, which gauges the economic fundamentals over the next six months, moving higher. The NDC is scheduled to release its December data next week.

Citing a survey conducted Jan. 1-7, Cathay Financial said 43.8 percent of the respondents said the local economy will improve over the next six months, while 25.0 percent said the economy will deteriorate over the next six months.

The figures translate into an economic optimism index over the next six months of 18.8 percent in January, up from 16.6 recorded in December, according to the survey.

In addition, the economic optimism index over the current economic climate compared with the previous six months also rose to 24.4 in January, up from 22.4 in the previous month, the survey found.

Cathay Financial said the index gauging expectations about wage hikes over the next six months rose to 6.4 in January from 2.1 in December, marking the ninth consecutive month of growth, while the index accessing a wage increase for the current month also rose to minus 1.3 from minus 5.5.

However, amid continued concerns over COVID-19 capped the willingness of the survey respondents to purchase big-ticket items, with the index falling to 5.1 in January from December's 5.8, the survey showed.

In the survey, the optimism index toward the local equity market also rose to 22.9 in January from 18.3 a month earlier.

Meanwhile, the index gauging the willingness for risk-taking rose to 16.8 from 12.7.

In addition to the positive COVID-19 vaccine development and recent improving economic data, Cathay Financial said that many equity investors were happy to see the reduction of political uncertainty in the United States after November's presidential vote.

Cathay Financial said the faith among the respondents in shares in Taiwan was boosted by a strong showing by the local equity market, where the benchmark weighted index on the Taiwan Stock Exchange, or Taiex, had repeatedly smashed its records.

The Taiex rose 22.8 percent in 2020 and has moved higher by an additional 8.73 percent so far this year, as the bellwether electronics sector continued to steam ahead. On Friday, the Taiex closed at 16,019.03 points.

The respondents in the January survey pegged Taiwan's 2021 economic growth at 3 percent, unchanged from a survey in December, with 86 percent saying they expect the annual growth to top 2 percent.

The estimate in the survey showed more caution than the government, as the Directorate General of Budget, Accounting and Statistics (DGBAS) forecast in late November that Taiwan's gross domestic product will grow 3.83 percent in 2021, a downgrade of 0.09 percentage points from an earlier forecast made in August.

According to the survey, consumer prices in Taiwan are forecast to grow 1-2 percent, compared with an anticipated 1.16 percent increase by the DGBAS.

The survey collected 20,912 valid online questionnaires from clients of Cathay Life Insurance and Cathay United Bank, which are fully owned by Cathay Financial.

(By Su Szu-yun and Frances Huang)

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