Taiwan calculates its GDP based on international standards and cannot do it any other way, National Development Council Minister Kuan Chung-ming (管中閔) said yesterday, in response to an economics professor’s criticism that the formula is flawed.
Kuan said GDP is determined by a set of rules followed by the international community and Taiwan cannot just use its own formula.
“In the future, should Taiwan’s calculation of GDP become unique in the world?” Kuan asked, in response to a front-page story in the Chinese-language Liberty Times (the Taipei Times’ sister newspaper) contending that Taiwan’s GDP is inflated by overseas earnings that do not contribute to the local economy.
The Liberty Times quoted National Central University professor Chiou Jiunn-rong (邱俊榮) as saying that as a measure of domestic economic activity, GDP should only include economic output generated domestically or overseas earnings remitted home.
Since 2005, Taiwan has included the overseas earnings of Taiwan-based companies into its calculations, even if they are not remitted to Taiwan, which has made GDP a less reliable indicator of the nation’s true economic strength, Chiou said.
If the US$19.3 billion in overseas earnings Taiwanese companies reported last year, much of which was not remitted to Taiwan, was left out of the GDP calculation, the nation’s GDP growth would have been negative rather than growing at a rate of 2.11 percent, the paper quoted him as saying.
That was misleading, because it did not exclude overseas earnings from Taiwan’s GDP in 2012, with which last year’s GDP was compared, he said.
Overseas earnings reported by local companies rose US$1.99 billion last year, while real GDP rose by nearly NT$320 billion (US$10.6 billion).