TAIPEI (Taiwan News) — The Central Bank warned Wednesday (March 11) that the Wuhan coronavirus (COVID-19) could trigger deflation in Taiwan.
Already, the global economy has been feeling the shadow of the epidemic with falling oil prices, extreme instability in the stock markets, and a drop in consumer confidence.
According to a Central Bank report, a plunge in consumption leading to an oversupply of products might easily result in deflation, with prices continuing to fall, CNA reported. Simultaneously, production will fall, wages will shrink, and interest rates and stock prices will plunge.
Predictions for Taiwan’s GDP growth in 2020 have already been slashed, with the government cutting estimates by 0.35 percent to 2.37 percent. Some analysts have even forecast growth dropping below 2 percent.
The fact that the Consumer Price Index turned negative in February is another cause for deflation worries, CNA reported, even though some analysts said the figure is a natural result of the Lunar New Year holiday.
The extent and duration of the coronavirus epidemic, especially outside of Taiwan, has to be watched for a while to see how serious its impact on the global economy will be, economists said.
