COVID-19 contagion hurts business sentiment among manufacturers

TAIPEI (CNA) — In the wake of the escalating spread of COVID-19 around the world, business sentiment in the local manufacturing sector weakened in March, the Taiwan Institute of Economic Research (TIER) said Friday.

TIER, one of the leading think tanks in Taiwan, said the composite index for the manufacturing sector, which gauges business sentiment among manufacturers, fell 6.48 points from a month earlier to 82.35, the lowest level since February 2009.

Business sentiment in the construction industry and the service sector was also impacted, with the composite indexes for the two down 3.99 and 3.44, respectively, at 85.79 and 82.19 in March, TIER said.

TIER president Chang Chien-yi (張健一) said at a news conference that the spread of COVID-19 is expected to continue to affect business sentiment in Taiwan in the second quarter when the full extent of the impact will become clearer.

The think tank has lowered its forecast of Taiwan’s economic growth in 2020 by 1.09 percentage point from an earlier estimate made in January to 1.58 percent, forecasting quarterly growth of 2.00, 0.30, 1.56 and 2.40 percent this year, respectively.

The silver lining is that strong demand for emerging technologies like 5G is expected to boost demand for semiconductors made in Taiwan and remote work and learning are likely to help the local information communication technology industry, which will mitigate the impact of COVID-19 on the economy, Chang said.

According to a TIER survey conducted in March, 16.7 percent of manufacturers believed the business climate will improve over the coming six months, compared with 20.2 percent in a similar poll in February, while 39.7 percent said it will weaken, up from 36.2 percent a month earlier

Commenting on the service sector, TIER cited the survey as saying respondents in the food/beverage, tourism, and insurance industries were more downbeat about the next six months.

As for the construction industry, TIER said, business sentiment was hurt by delays in some new private projects in the wake of a lack of construction materials and workers, although government efforts to push for public infrastructure helped limit the impact on sentiment.

At the news conference, Liu Pei-chen (劉佩真), a TIER economist, said local home buyers for self-dwelling purposes continued to enter the property market in March, at a time when the local central bank cut interest rates.

According to TIER, transactions of residential and commercial property in the six largest cities in Taiwan rose 9.9 percent from a month earlier in March.