The Cabinet’s decision to give a pay raise to civil servants will help spur the nation’s private consumption and thereby have a positive impact on Taiwan’s economy, analysts said yesterday.
Premier Wu Den-yih (吳敦義) announced yesterday that Taiwan’s civil servants, military personnel and teachers would receive a 3 percent salary increase starting in July.
“The pay raise for civil servants could drive up their ability to consume, further increasing the overall momentum of private consumption,” Cheng Cheng-mount (鄭貞茂), chief economist at Citigroup in Taipei, said by telephone yesterday.
The nation’s Directorate--General of Budget, Accounting and Statistics (DGBAS) forecast Taiwan’s GDP growth would increase by 0.05 percentage points this year on rising domestic consumption after the pay raise.
Wang Lee-rong (王儷容), director of the center for economic forecasting at the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院), also said the raise would benefit the nation’s economy.
“Although the raise could drive up Taiwan’s inflation, it helps build stronger private consumption momentum, which benefits the economy more,” Wang told the Taipei Times yesterday.
Taiwan’s consumer price index (CPI) could increase by 0.02 -percentage points this year -because of the pay raise, DGBAS data showed.
More importantly, the pay raise would provide incentives for talented workers to stay in Taiwan and it would help solve a problematic brain drain in recent years as the private sector might follow suit in hiking wages, Wang said.
“Many excellent workers have run off to other countries in recent years, because pay rates here have stagnated and remain unsatisfying. This has had an adverse impact on the nation’s development and economy,” Wang said.
As the pay raise could increase the government’s budget expenses by NT$18.7 billion (US$647 million) this year, Minister of Finance Lee Sush-der (李述德) said the -ministry would use tax income and earnings from government-owned corporations to pay for it.
“Strong first-quarter tax revenues made us optimistic about earning enough income for the pay raise,” Lee told a media briefing yesterday.
Tax revenues in the first quarter reached NT$309.9 billion, representing a 4.9 percent increase from a year earlier, and it allowed the government to exceed its budget goal by 4.1 percentage points, the ministry’s statement said.
Cheng also said he was not worried about the additional budget expenses as the strong private consumption momentum following the pay raise would likely drive up the ministry’s tax revenues.
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