Taiwan central bank seen standing pat again as economy rebounds

TAIPEI: Taiwan's central bank will likely keep its policy rate steady at a record low this week as the economy weathers the coronavirus pandemic far better than many of its regional peers, supported by a rebound in exports, a Reuters poll showed on Monday.

The central bank is expected to keep the benchmark discount rate steady at 1.125% on Thursday, all 16 economists in the poll said, after holding fire at its past two quarterly meetings. It last cut the rate in March.

Taiwan's export-reliant economy has been supported by global demand for tech products from an increasing number of people working from home during the pandemic. That trend is expected to continue and help underpin a rapid economic recovery in 2021.

The Finance Ministry said last week it saw 2020 exports hitting a record high, while central bank governor Yang Chin-long said earlier in December that this year's economic growth was expected to be better than originally forecast.

Kouan Hsu, an analyst at Capital Securities, said while Taiwan's economy was doing well, it still needed support due to fears the raging pandemic in the United States and Europe could lead to new restrictions there, impacting demand for imports.

"The best way to do that is loose monetary policy," Hsu added.

Taiwan's economy grew 3.92% in the third quarter, bouncing back strongly from a coronavirus-induced contraction of 0.58% in the second quarter.

Taiwan has the pandemic well under control thanks to early and effective prevention work, and currently has 127 active cases, all imported, being treated in hospital.

Life has continued almost as normal, though Taiwan's borders remain largely closed to foreign visitors.

The economy is expected to grow 2.54% in 2020, the slowest in four years but stronger than competitors like South Korea, as a strong rebound in exports and consumer confidence helps the island shake off the pandemic's blow, the statistics office said last month.

It predicted 3.83% growth for 2021.

The central bank will also likely give its revised forecast for economic growth next year on Thursday.

Taiwan's manufacturers are a key part of the global supply chain for technology giants such as Apple Inc.