Xu Zhiqiang, co-host of the National Taiwan University Industry-University Cooperation Project, pointed out that the inflation rate has been higher than the economic growth rate for two consecutive years, and this year our economy has shown "stagnant inflation."

(Photo provided by Cathay Gold)

[Reporter Wu Xintian/Report from Taipei] Cathay Pacific National Taiwan University’s industry-university team now predicts that the inflation rate may be higher than the economic growth rate in 2023. It may become the second consecutive year after the 2008 financial tsunami that the inflation rate is higher than the economic growth rate. stagnant inflation”.

Scholars pointed out that in the face of this economic situation, the central bank and the government must carefully evaluate the mix of fiscal and monetary policies.

Xu Zhiqiang, the co-host of the National Taiwan University Industry-University Cooperation Project, pointed out that Taiwan has only experienced the global financial tsunami in 2008 and 2009 so far, and the inflation rate was higher than the economic growth rate for two consecutive years.

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In 2022, my country's CPI annual growth rate will rise by 2.95%, and the economic growth rate will be 2.43%.

If the forecast comes true, it will be another two years in a row that inflation has been higher than economic growth.

According to Xu Zhiqiang's analysis, Taiwan's economy follows a growth cycle, and the economic growth rate is almost always positive. Only in 2001 and 2009 were negative values.

In the long run, the average economic growth rate in the past 23 years has been 3.6%, and this year’s estimated value is only 1.8%; while the average inflation rate in the past 23 years has been 1%, this year’s estimated value has doubled to 2%; in the short term, last year’s Q4 In the first half of this year's Q1, the economic growth rate was negative and the inflation rate was higher than 2.6%. In economics, it is clear that inflation has stagnated.

Xu Zhiqiang said that the current economic situation is worse than the financial tsunami, but not as bad as the financial tsunami. The current economic situation this year is stagnant inflation.

He pointed out that how the central bank and the government face this economic situation must carefully match fiscal and monetary policies.

He also emphasized that during the financial tsunami in 2008, many financial institutions closed down, which made governments of various countries deepen their supervision on financial institutions. Therefore, although there are reports of financial crises in European and American banks this year, they are all small and medium-sized banks, and large banks are financially sound. It is strictly monitored by financial regulators.

Chen Yanru, Chief Financial Officer of Cathay Financial, also added that the current financial environment is different from the financial crisis in 2008, including the fact that the United States continued to increase the leverage of the household sector in 2008, which gradually evolved into a subprime mortgage crisis, which is currently not the case; Resilience and consumption power are better than before, and the ability to withstand the downturn of the economy is much better than before; third, the financial environment has shifted from wealth appreciation to value preservation, and Taiwan’s financial system has abundant liquidity. Provide better support for the economy and the financial market; and although the central bank has raised interest rates, the current interest rates of government bonds and corporate bonds are relatively lower than the peak in 2007.

With stagnant inflation, Xu Zhiqiang said that investors are looking for financial products with a yield higher than 3%. The current bond market is putting pressure on many financial institutions, but it is also an investment opportunity.

He pointed out that with the rise of interest rates in the United States, coupled with bonds with high credit ratings, most of them have a yield rate of about 4%, which exceeds the inflation rate. They are feasible investment channels, and bond prices have fallen sharply recently. Pay attention to exchange rate risk.

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