Taiwan's Central Bank warns of four major risks to the world economy

Central Bank expresses optimism over the outlook for Taiwan's export-driven economy

The photo shows Taipei Xinyi District (Image courtesy of Flickr user Sinchen.Lin)

The photo shows Taipei Xinyi District (Image courtesy of Flickr user Sinchen.Lin)

TAIPEI (Taiwan News) - Taiwan's Central Bank recently laid out a list of four major risks facing the global economy for 2019 in a government publication, while it expressed optimism over the outlook for Taiwan's export-driven economy.

In the latest issue of the Taiwan Banker, the monetary policy maker pointed out the four major risks to the world, including trade war uncertainty, higher borrowing costs following higher interest rates in the U.S., increased downside risk to China's economy, and escalating geopolitical tensions as well as ambiguities.

The heightened trade tensions and uncertainties between the U.S. and its trading partners was named as the top risk for the next year, including a trade war with China, revision of a bilateral free trade agreement with South Korea, and NAFTA renegotiation with Mexico and Canada.

The second major risk laid out by the Central Bank is U.S. interest rate hikes which send the greenback stronger and the USD-denominated borrowing costs higher around the world, and that certain emerging economies are particularly vulnerable to the appreciation of USD and have become prey for speculators.

The third major risk, according to the report, is the downside to China's economy. China's financial market has been affected by multiple incidents, including the largest trade war with the U.S., which is believed to have dampened investor sentiment, as well as export growth. Also, higher corporate bond default rates, non-financial liabilities, and a dramatic fall of online P2P lending platforms are leaving their impact on China's financial stability.

Geopolitics constitutes the fourth major risk in the Central Bank's report, encompassing both geographic and political factors that could negatively impact capital markets, including U.S. resumption of sanctions on oil exporter Iran and stalled Brexit talks.

As to the 2019 global economic outlook, the Central Bank forecasts stable growth for world economy, which is indicative of maintained export growth momentum for Taiwan. Export growth along with an increase in minimum wages and expected increasing investment under the government's Forward-looking Infrastructure Development Program, will contribute to stable domestic economic growth.