March 10, 2020 / 9:24 AM / 21 days ago

UPDATE 1-Taiwan c.bank says coronavirus is major uncertainty for economy this year

(Adds details, quotes)

TAIPEI, March 10 (Reuters) - The spread of the new coronavirus presents a major uncertainty for Taiwan’s economy this year and will not be good for consumer demand, the island’s central bank said in a report to parliament on Tuesday.

Taiwan, whose largest trading partner is China, cut its estimate for 2020 economic growth to 2.37% last month as the outbreak threatened its economy.

“The recent spread of the pneumonia epidemic has impacted the global economy and affected Taiwan’s exports and private consumption. The development of the epidemic is a major uncertainty affecting economic growth this year,” the central bank said in its report.

The virus could shave up to 0.7 percentage points from economic growth this year, with the impact concentrated in the first quarter, it added, citing predictions from “major international agencies”.

But government stimulus will help the economy, the central bank said.

The island is rolling out a T$60 billion ($2 billion) stimulus package to help soften the economic impact of the virus.

Premier Su Tseng-chang told parliament earlier on Tuesday that the government is considering whether to boost that, especially as the virus is now spreading rapidly in Europe, while a collapse in oil prices added further uncertainty.

The central bank said in its report that it will make adjustments to the foreign exchange market in a timely manner in order to “maintain order”.

Further rate cuts by the U.S. Federal Reserve could lift the Taiwan dollar, hurting its export competitiveness.

While Taiwan has only reported 47 cases of the virus, compared to more than 80,000 in China, it has taken firm measures to prevent its further spread, suspending visits to the island for most Chinese visitors and severely limiting flights to China, including Hong Kong and Macau.

Some Taiwan manufacturers have already felt the pinch.

Apple Inc manufacturing partner Foxconn last week reported its biggest monthly drop in revenue in about seven years as the coronavirus outbreak played havoc with its business.

Taiwan’s government has also warned of the impact of the virus on exports for the trade-reliant economy, and says March exports are expected to decline 2% to 5% compared with the year-ago period.

Taiwan’s key stock index eked out gains to close up 0.24% on Tuesday, having dropped 3% the day before. (Reporting by Liang-sa Loh and Yimou Lee; Writing by Ben Blanchard; Editing by Louise Heavens, Kirsten Donovan)

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