TAIPEI (Reuters) - There is room for more interest rate cuts in Taiwan, but they will not be reduced to zero or into negative territory, and the government will offer more funds for small- and medium-sized companies if needed, its central bank said on Monday.
The government has repeatedly warned of the impact of the coronavirus epidemic on the export-oriented economy, and has been taking steps to mitigate it.
Taiwan has reported 306 cases of the virus to date and five deaths, far lower than many of its neighbours, because of early control measures and a good public health system, though it is seeing an upsurge in people who were infected overseas.
The central bank this month cut interest rates for the first time in more than four years to a new low of 1.125%, and reduced its growth forecast for the economy amid growing fears that the coronavirus could trigger a global recession.
It also said it would provide banks with T$200 billion ($6.61 billion) of financing to support companies hit hard by the virus’ impact.
Speaking in parliament, central bank governor Yang Chin-long said more money would be made available if the T$200 billion is insufficient.
“In addition to launching T$200 billion in financing, I have personally written to and called up the banks one by one, hoping that they can help,” he said.
If the virus continues into the third and fourth quarters of this year, there will only be a small chance the economy will maintain growth of 2% or above, Yang said.
The bank has already cut its full-year economic growth outlook to 1.92% from 2.57% forecast in December due to the virus.
Yang said he expects Taiwan’s Directorate General of Budget, Accounting and Statistics will adjust its GDP forecasts once economic data for March is out.
Some banks have cut their GDP forecasts for Taiwan to far below the central bank’s expectation. ING has downgraded its forecast to -0.4% from 0.8% for 2020.
However, Yang said that so far the impact of the virus on the financial markets was not as severe as in 2008, and there would not be a financial crisis, with sufficient liquidity in the system.
The virus’ impact will be short-term, though still longer lasting and more serious than the 2002-2003 SARS outbreak, he added.
The island is rolling out a T$60 billion stimulus package to help soften the economic impact of the virus and President Tsai Ing-wen has said a further T$40 billion was available.
($1 = 30.2550 Taiwan dollars)
Reporting by Liang-sa Loh; Writing by Ben Blanchard. Editing by Gerry Doyle