TAIPEI (Reuters) – Taiwan’s central bank will likely keep its policy rate at a record low this week as the economy benefits from global demand for technology thanks to the work-from-home trend and a well-controlled COVID-19 situation at home, a Reuters poll showed.
The central bank is expected to leave the benchmark discount rate unchanged at 1.125% on Thursday at its quarterly meeting, all 25 economists in the poll said, after holding fire at its past five meetings. It last cut the rate in March of 2020.
Taiwan’s export-reliant economy has been supported by global demand for tech products from an increasing number of people working and studying from home during the COVID-19 pandemic, and has been further helped by a worldwide economic recovery as major economies like the United State emerge from lockdown.
In the second quarter, the economy expanded 7.43% from a year earlier, slowing from 8.92% growth in the first quarter but still better than many of its regional peers.
With only a handful of daily domestic COVID infections being reported and curbs on personal gatherings, in-restaurant dining and entertainment venues being eased in late July, consumption is now also starting to bounce back.
“Taiwan’s domestic market has already gradually been improving, and, externally, support continues to come from semiconductors,” said Tony Phoo, Standard Chartered’s senior Taipei-based economist.
However he pointed to uncertainty ahead, including fears China’s economy will slow in the fourth quarter and whether the Biden administration will be able to raise the federal government’s debt limit and pass its $3.5 trillion social spending legislation.
Taiwan’s manufacturers, including Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world’s largest contract chip maker, are a key part of the global supply chain for technology giants such as Apple Inc.
Export-dependent Taiwan also faces uncertainty about the spread of the Delta variant in key markets like China, the United States and Europe.
The central bank will give its own revised forecast for economic growth this year on Thursday, having predicted a 5.08% expansion at its last quarterly meeting in June, with exports performing strongly.
(Poll compiled by Carol Lee; Reporting by Liang-sa Loh and Ben Blanchard; Editing by Ana Nicolaci da Costa)
