Taiwan's annual economic growth rate stands at about 4 percent, a far cry from the double-digit growth of the BRIC countries -- Brazil, Russia, India, and China. Compared to the rates of developed countries, the growth here isn't too shabby, but compared to the growth of the Taiwanese stock market, it's clear that the stock market is underperforming.
The bourse's inability to reflect economic growth is based on politics. Taiwan's politicians are often belligerent, sparking vitriolic fights between the government and opposition, long bad periods in the relationship with China, and bickering with the US, Japan and other countries. This belligerence often leads to instability affecting stock market growth.
Taiwan is now facing yet another political event affecting the economy -- the political and social confrontation created by former Democratic Progressive Party (DPP) chairman Shih Ming-teh's (
An analysis by the Taiwan Institute of Economic Research implies that the effects of the campaign to remove Chen may lead to social unrest, which will inevitably affect financial markets. The stock market has already dropped for several days, leading to the evaporation of hundreds of billions of NT dollars' worth of company market value. If the bourse continues to suffer, private consumption and investment could fall, leading to a further drop in economic growth for the year. In this vicious cycle, investor confidence would then decrease even more.
If the nation's social unrest cannot be dealt with in the short term, international credit ranking organizations could adjust their ratings for Taiwan. If that were to happen, it would become more expensive for Taiwanese businesses to borrow money, which would have a negative impact on corporate investment.
A nation's political stability is one of the main factors considered when international investors decide on where to put their money. The more fervent the anti-Chen demonstrations grow, the more likely foreign investors will be to take a wait-and-see attitude.
A falling stock market and shrinking wealth could lead to falling consumption. When the Council for Economic Planning and Development set an annual economic growth of 4.5 percent, it estimated that private consumption growth would remain at 3 percent. According to a recent estimate from the Directorate General of Budget, Accounting and Statistics, however, exploding credit card debt is causing annual consumption growth to shrink to 1.7 percent.
The political uncertainty caused by the anti-Chen campaign could negatively affect consumer and investor confidence, which in turn might cause the economy to slip further.
The Cabinet is trying hard to push the economy forward and late last month invited business and academic representatives to the Conference on Sustaining Taiwan's Economic Development. The representatives met with government officials to discuss ways to formulate policies for overcoming Taiwan's economic problems, with the result that a consensus was reached in more than 500 areas.
The anti-Chen campaign may negate that achievement and cause Taiwan's economy to regress further.
To quote former US president Bill Clinton, "It's the economy, stupid." The strongest wish of people in this country is for economic growth. We hope that politicians can understand this and stop their infighting.
It has now become necessary to paraphrase Clinton and say that although it's about the economy, the economic problem is about politics. Taiwanese politicians should start displaying some self-knowledge and self-restraint.
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