Taipei, March 12 (CNA) If the military conflict between Russia and Ukraine continues and the resulting impact on the global economy intensifies, Taiwan’s gross domestic product (GDP) growth could be reduced by 0.3 to 0.4 percentage points this year, according to the Central Bank.
In a report written to the Legislative Yuan, the central bank said that as long as Russia’s war on Ukraine has no immediate sign of ending, the world’s major economies are likely to step up their sanctions against Russia, a decision that should affect consumption. and investor confidence around the world.
The central bank said uncertainty stemming from sanctions on Russia could hurt consumer and investment confidence around the world, and possibly slow the pace of global economic recovery. Export-oriented Taiwan could suffer collateral damage, the central bank added.
In addition, soaring international crude prices and soaring prices of grains such as corn, wheat and soybeans due to sanctions against Russia have raised inflationary pressure in Taiwan, according to the central bank.
More sanctions against Russia
On Friday, US President Joe Biden announced that his country and its allies would further sanction Russia by removing its most favored nation status after announcing a ban on gas and oil imports from Russia on Tuesday.
Earlier this month, Russia was kicked out of the Society for Worldwide Interbank Financial Telecommunications (SWIFT), the global provider of secure financial messaging services, making it extremely difficult for the country to conduct international transactions.
Russia and Ukraine ended their fourth round of talks without any breakthrough on Thursday, leading Moscow to resume its bombardment of Kiev and other Ukrainian cities, and more Ukrainians to flee their country.
Oslo-based energy research firm Rystad Energy announced the worst-case scenario on Thursday, saying Brent, the global benchmark for oil, could rise above $240 a barrel this summer.
Local economic prospects
The central bank said the local consumer price index (CPI) is expected to increase by 0.5 to 0.7 percentage points this year and exceed the 2% warning level, while GDP growth of Taiwan for 2022 could drop by 0.3 to 0.4 percentage points.
At the end of February, the General Directorate of Budget, Accounting and Statistics predicted that Taiwan’s GDP would grow by 4.42% in 2022, with the CPI expected to increase by 1.93%.
At the last quarterly policy-making meeting held in December, the central bank forecast Taiwan’s economy to grow 4.03 percent and the CPI to rise 1.59 percent this year.
Meanwhile, the central bank said exposure to Russia and Ukraine by the local financial sector was low, so the impact from the military conflict should be limited.
Exposures of financial companies
According to data compiled by the Financial Supervisory Commission, the exposure of Taiwanese financial companies to Russia and Ukraine stood at NT$271.21 billion (US$9.55 billion) at the end of January, down about NT$10 billion from the previous month.
The central bank’s report came before the bank’s governor, Yang Chin-long (楊金龍), is due to attend a hearing at the Legislative Yuan on Monday to brief lawmakers on economic developments.
The central bank’s next quarterly policymaking meeting is scheduled to begin on Thursday, where it will provide its economic forecast and announce whether it will launch a rate hike cycle.