Public calls to narrow the wealth gap, promote solid growth in domestic demand and pursue long-term industrial restructuring are the three major challenges facing President Ma Ying-jeou (馬英九), who won his re-election bid yesterday, economists said.
“Despite Ma winning the election, the close race showed that the new government will have to focus on creating more jobs and narrowing the wealth gap,” Polaris Research Institute (寶華綜合經濟研究院) president Liang Kuo-yuan (梁國源) said by telephone.
Liang said the result of the election was an indication that the public believed Ma’s government had paid attention to the wealth gap issue — which was the focus of the campaign of his main rival, Democratic Progressive Party (DPP) Chairperson Tsai Ing-wen (蔡英文).
However, the Chinese Nationalist Party (KMT) government has to work at how to strike a balance between pursuing economic growth and creating job opportunities to “ensure the public feels the growth,” Liang said.
National Taiwan University economics professor Kenneth Lin (林向愷) also stressed the importance of a growing economy that can really create jobs.
“For low-income people, creating more jobs would be a good way to help them, narrowing the wealth gap,” Lin said.
The government should also reform the taxation system and impose a heavier levy on people with higher incomes to promote a more equitable system, Lin said.
Economists said stimulating domestic demand in the face of a slowing global economy would be another important issue for Ma’s government over the next four years.
“Driving up domestic demand is very important to overall economic growth, with the latest export order data confirming that growth in Taiwanese exports might continue to slow in the first half of the year given the eurozone crisis,” Liang said.
The government should boost public investment to help boost domestic demand, he said.
It should also encourage enterprises to raise wages and to share their profits with employees to increase domestic demand, he said.
Taiwan’s economic growth is forecast to slow to 4.19 percent this year from 4.51 percent last year, according to the Directorate-General of Budget, Accounting and Statistics.
Earlier this week, Deutsche Bank chief Asia-Pacific economist Michael Spencer said weakening external demand would slow Taiwan’s GDP growth to 3 percent this year, from an estimated 4.4 percent last year.
Looking at the inflation front, Liang said consumer prices would not be the nation’s priority concern this year thanks to weak economic momentum around the world.
However, Taiwan Institute of Economic Research (台灣經濟研究院) director Steven Yang (楊家彥) said inflationary pressure could still be a risk at some point over the next four years because a weak global economy might drive more countries to adopt quantitative easing measures in the near future.
“If the prices of raw materials and crude oil were to rise ahead of an economic recovery, it might bring more downside risk,” Yang said.
In a bid to navigate the nation’s long-term economic growth, economists yesterday also said they expected the government to speed up adjustment of the nation’s industrial structure, and further help small and medium-sized enterprises, rather than solely focusing on economic integration with China.
National Chengchi University finance professor Norman Yin (殷乃平) said that in terms of industrial adjustment, the government could start by helping consolidate domestic industries, such as the LCD and DRAM sectors, to enable them to better compete with their competitors in South Korea.