May 14, 2020 / 4:59 AM / 3 months ago

UPDATE 1-Taiwan c.bank says still room for further interest rate cuts

* Taiwan c.bank has room for more rate cuts - governor

* Will consider global c.bank actions, Taiwan’s virus situation

* Says cannot be sure 2020 GDP growth will be 1% (Recasts, adds details, quotes, byline)

By Liang-sa Loh

TAIPEI, May 14 (Reuters) - Taiwan’s central bank has room for further interest rate cuts, governor Yang Chin-long said on Thursday, but he cautioned economic growth could be less than 1% this year due to the impact of the coronavirus pandemic.

In March, the central bank cut interest rates for the first time in more than four years to a low of 1.125%, and reduced its growth forecast for the economy amid growing fears the pandemic will trigger a deep global recession.

Speaking in parliament, Yang said there was “basically” room for more rate cuts, but that they would also see what other central banks around the world were doing.

“The central bank will observe the rate cutting situation of other central banks internationally, and how our anti-epidemic situation is,” he said.

The central bank will hold its next quarterly meeting in mid-June.

Taiwan’s economic growth slowed to its weakest in nearly four years in the first quarter, as the coronavirus crimped domestic consumption though still-strong demand for electronics helped soften the impact on the trade-reliant economy.

“Looking at things now, I don’t dare to say whether there will be a problem to keep this year’s GDP (growth) at 1%,” Yang said.

The government has warned of a slowdown in export orders that will especially hurt its tech manufacturers in the coming months, and is rolling out an economic stimulus package expected to be eventually worth T$1.05 trillion ($35.13 billion).

Taiwan’s gross domestic product (GDP) expanded by 1.54% in the January-March period from a year earlier, preliminary data from the statistics agency showed, less than half the pace of the fourth quarter’s 3.31%.

While Taiwan has not gone into total lockdown to contain the spread of the virus due to relatively successful measures that prevented a rapid spread of the disease, the government has repeatedly warned of uncertainty for the economy.

Last month, it downgraded its growth forecast for this year to between 1.3% and 1.8%, from 2.37% in February.

Some analysts, however, say Taiwan’s success at containing the pandemic will not help avert a recession in 2020. Domestic consumption and the job market have been hit hard while exports, which contribute to more than 60% of its GDP, have also dropped from a collapse in global demand.

Taiwan has reported 440 coronavirus infections and seven deaths, far lower than most of its neighbours, and the government is slowly lifting some restrictions it had put in place, such as bans on fans attending baseball matches. ($1 = 29.8920 Taiwan dollars) (Reporting by Liang-sa Loh, Writing by Ben Blanchard; Editing by Jacqueline Wong)

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