Many local and foreign economic research institutes have recently revised upwards their GDP growth forecasts for Taiwan on the back of a strong recovery in Asia, but it appears that the economic reality is not as rosy as the figures would make it seem.
While the economy has rebounded from the global financial crisis, with the first quarter witnessing 13.27 percent GDP growth, it was mainly because of a higher comparison base with last year, when the economy contracted 9.06 percent in the first quarter.
Academia Sinica, the nation’s top research institute, has warned in its latest economic forecast report that in spite of the government’s various employment initiatives, the still-ailing job market is holding back domestic consumption growth.
“Taiwan’s labor market has yet to improve substantially,” Ray Chou (周雨田), a research fellow at Academia Sinica, said during a media briefing on Monday last week, adding that he expected domestic consumption to grow by a marginal 1.95 percent this year.
Evidence of the ailing job market can be seen in last month’s unemployment rate, which edged up 0.02 percentage points to 5.16 percent, snapping four months of decline — and it may continue to rise in the next couple of months because of the school graduation season.
Taiwan’s jobless rate is also higher than those of neighboring economies, including Hong Kong at 4.6 percent and South Korea at 3.9 percent, the Directorate-General of Budget, Accounting and Statistics’ data shows.
“It usually takes a long time for the unemployment rate to return to its previous level after an economic downturn,” Gordon Sun (孫明德), deputy director of the macroeconomic forecasting center at Taiwan Institute for Economic Research, said by telephone.
Despite the economic recovery, Sun said that the root cause of the unemployment problem lies in the emigration of local traditional industries, which have been creating jobs and raising wages in China, leaving many people unemployed in Taiwan.
Sun said that many research institutes revised upward their economic growth forecasts for Taiwan this year chiefly because of better-than-expected performance in the first half of the year. He said that economic growth would decelerate in the coming months.
“The government should be more prepared [to maintain economic growth] in the second half of the year, as many economic stimulus packages will gradually come to an end toward the end of the year,” Sun said.
This is reflected by the nation’s economic monitoring indicators, which became a “yellow-red” light in May, snapping a four-month of streak of signaling “red,” with the index for employment in non-agricultural sectors flashing a “green light” for four consecutive months.
While the government forecasts the economy will expand by 6.14 percent for the full year and the Economist Intelligence Unit last month said the number could be 8.5 percent, rising property and commodity prices have also caused public discontent, in particular amongst salaried workers.
“Growth in real income is not proportional to the increase in consumer prices,” a financial specialist at a local retail company, who requested anonymity, told the Taipei Times, saying that the robust economic growth did not bring substantial benefits to her life.
“Personally, I didn’t increase my spending because of the economic recovery since my salary is still the same,” she said. “It is also almost impossible for a nine-to-five worker to afford to buy a house [in Taipei].”
In the first five months of this year, nominal average monthly wages were NT$48,573 per person, up 7.18 percent from a year earlier, but that was still lower than the NT$49,321 recorded for the same period in 2008 before the global financial crunch broke, the latest data shows.
Worse yet, real average wages, after allowing for an inflation rate of 1.91 percent in the first five months, dropped to NT$46,322 per person — the second lowest for that period in the past 13 years — indicating that wages did not rise proportionally to economic growth.
“The nation’s industrial structure needs to be adjusted before salaried workers can enjoy the benefits of the economic recovery,” Sun said. “Taiwan needs to develop its service sector, which will create a lot more job opportunities.”
The Council for Economic Planning and Development, the government’s economic policy-making body, is scheduled to release its economic monitoring indicators for last month today, which are expected to continue to flash a “yellow-red” light, economists said.
The index of leading indicators, used to project the economic landscape three to six months ahead, is expected to have fallen 0.3 percent last month —- the first drop in 17 months — after a rise of 0.3 percent in May because of declines in export orders and stock index sub-indicators, Citigroup Global Markets forecast on Friday.
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