Financial and Technology News

It will be difficult for the Taiwanese economy to stage a meaningful recovery in the short term because of insufficient domestic investment, UBS said yesterday.

Kevin Zhao, head of the Swiss bank’s global sovereign, currency and fixed-income division, said that Taiwanese have a large chunk of savings, but are reluctant to invest in the domestic market to push up the real economy.

According to the Directorate- General of Budget, Accounting and Statistics (DGBAS), the nation’s excess savings — the amount of savings that exceed planned investments — are expected to total NT$2.61 trillion (US$82.8 billion) this year.

At the same time, the excess savings rate — the ratio of savings to gross national income — is likely to hit a 29-year high of 14.89 percent.

While domestic investments in Taiwan are slowing, Taiwanese are keen to move their funds overseas, causing an adverse impact on the local economy, Zhao said.

Data compiled by the central bank showed that Taiwan’s financial account — which includes direct and portfolio investments — registered a net outflow of US$15.4 billion in the second quarter.

It was the 24th consecutive quarter in which Taiwan recorded a net financial account outflow.

Zhao said he does not see a quick turnaround for Taiwan, as the current obstacles facing the nation are likely to keep the economy weak over the next two years.

Zhao said that he understood that the central bank has been trying to make the New Taiwan dollar cheaper to boost the nation’s export competitiveness.

However, there is limited room for the bank to push down the NT dollar because of the nation’s large pile of foreign exchange reserves.

As of the end of July, the nation’s foreign exchange reserves hit a new high of US$434.09 billion, marking the sixth consecutive month that they smashed the previous record.