Taiwan central bank cuts growth outlook, holds fire on rates

TAIWAN - TAIPEI. Taiwan's central bank unexpectedly left its policy rate unchanged on Thursday but further reduced its growth forecast for 2020, as the coronavirus pandemic threatens to deal a further blow to the trade-reliant economy.

Its decision to stay on hold bucked a rush by global central banks to loosen monetary settings as policymakers scramble to boost growth and financial stability due to crumbling investor sentiment.

Taiwan's central bank left the benchmark discount rate at 1.125%, where it has stood since March when it lowered the rate to a historic low.

The median forecast of 16 economists in a Reuters poll was for the discount rate to be cut to 1%.

The central bank said that it had cut its full-year economic growth outlook to 1.52% from 1.92% forecast in March, saying the virus outbreak could curb Taiwan's exports, but that there were signs of economic recovery.

"Although the global economy still faces many uncertainties, the domestic economy is likely to recover mildly, supported by domestic demand," it said in a statement.

The central bank said it expects growth in the second half to be stronger than the first half, thanks to the government's stimulus programme and continuous capital investment in the semiconductor sector.

While Taiwan has largely shaken off the pandemic with just five active coronavirus cases, the outbreak has hurt the job market and consumption, pushing the government to roll out a T$1.05 trillion ($35.4 billion) stimulus package to help soften the impact.

Exports in May fell for a third straight month due to slowing global demand, with the government "cautious" about the outlook for Taiwan's manufacturers, a key part of the global supply chain for tech heavyweights such as Apple. The central bank also lowered its 2020 core inflation forecast to 0.36%, down from 0.55% forecast in March.