Fri, Jun 07, 2013 - Page 13 News List

Budget cuts ‘will not affect growth’

NOTHING WASTED:The capital account is to be ‘maintained at a certain level,’ the premier said, to boost private consumption and produce positive economic effects

By Shih Hsiu-chuan  /  Staff reporter

Premier Jiang Yi-huah (江宜樺) yesterday dismissed concerns that a planned 8 percent across-the-board budget cut for next year would have a negative impact on economic growth, because the government is not reducing the budget for public construction projects.

The Director-Generate of Budget, Accounting and Statistics (DGBAS) has demanded that each government department slash at least 8 percent from next year’s operating budget for their day-to-day activities.

Concerns have been raised about the effect of the austerity policy on the economy, because the size of the planned cut is reportedly the largest budget-cutting plan in recent history.

Despite the planned cut in expenditures under the current account, the government will inject “strategic thinking” into the budgeting process to strengthen the momentum of economic growth, Cabinet spokesperson Cheng Li-wun (鄭麗文) quoted Jiang as saying at a Cabinet meeting.

The budget to be earmarked for public construction and the implementation of the government’s major policies under the capital account, which involves long-term investment projects, will remain unaffected by the planned budget cuts, Jiang said.

The size of the capital account for the next fiscal year will be “maintained at a certain level” to encourage private consumption, and produce positive and long-term economic effects, he added.

At a press conference later, Public Construction Commission Minister Chen Chen-chuan (陳振川) said he has warned against reducing the budget for public construction projects.

The NT$379.1 billion (US$12.74 billion) spent on public construction projects this year, or 2.66 percent of GDP, is the lowest amount spent in the past 10 years and is much lower than China’s spending on construction projects, which reached 22 percent of GDP this year, the 5 percent of GDP spent in the US, the 9 percent of GDP spent in South Korea and the global average of 10 percent of GDP spent over the past 20 years, Chen Chen-chuan said.

Chen Chen-chuan said the large gap between the money spent in Taiwan on social welfare projects, or 22.2 percent of the budget, and on public construction projects, 9 percent of the whole budget, is rarely seen in the rest of the world.

If the government continues to ignore the importance of putting money aside for investments in public projects and infrastructure, economic recovery will be hampered and the unemployment rate will rise, Chen Chen-chuan said.

Council for Economic Planning and Development Vice Minister Chen Chien-liang (陳建良) said the planned budget cut would not directly relate to economic growth, because the cuts would be on “unnecessary spending.” The money to be saved would be spent to boost the economy, increase the quality of public construction projects and promote efficiencies, he added.

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