Stronger-than-expected economic growth in the second quarter of this year and an upward nudge for the full-year economic growth forecast offered the public a rare glimpse of good news last week following a slew of worrisome reports about the US subprime mortgage crisis. The pause to catch our breath has been welcome, but no one should be so optimistic as to believe that the worst is now over.
As the breadth of the subprime mortgage problem has only started to emerge, and the ongoing ramifications on the worldwide financial market will continue to develop over the coming weeks or even months, public confidence and consumer sales are not out of the woods yet.
As long as the subprime mortgage problems persist, the global economy is not expected to grow quickly. Taiwan -- where exports constitute more than 70 percent of GDP -- will likely be impacted negatively.
On Thursday, the Directorate General of Budget, Accounting and Statistics said the nation's economy grew 5.07 percent annually in the second quarter.
It was the highest growth in the last six consecutive quarters and the bureau attributed the strong growth to a higher-than-expected increase in private investment -- which grew 12.5 percent in the second quarter compared to an earlier forecast of 2.8 percent growth.
With expectations of stable export growth and recovering domestic consumption in the second half of the year, the government raised its GDP growth forecast to 4.58 percent this year, which is higher than the forecast of 4.38 percent it made in May.
The bureau said it was not pessimistic about the subprime crisis as the disclosed losses by domestic institutions have been rather limited. Such optimism will be put to the test in the fourth quarter, as the nation will see whether the traditionally high season for electronics and information technology products will be impacted by the slowdown in US consumer sales.
For one thing, the factors that were used to formulate the government's latest GDP statistics predated the US subprime mortgage crisis. As Taiwan's economy has a relatively stronger link with US consumption than other Asian economies, Goldman Sachs predicted that a one-percentage point drop in US consumer sales would result in a 1.1 percent decline in Taiwan's GDP growth.
Lehman Brothers also said the US subprime issue would pose a stress test for Taiwan's economy through next year.
Meanwhile, private consumption showed a steady increase of 2.6 percent in the second quarter of the year, compared to a rise of 2.1 percent in the previous quarter and 1.3 percent a year earlier.
But given a slow increase in household income -- which was up 1.6 percent last year from a year earlier and a mere 0.1 percent growth in average monthly pay per employee in the past seven years -- it is hard to foresee robust consumption growth in the coming quarters, even though the government projected at 3.7 percent increase in the second half of the year and 3 percent growth for the year.
Because domestic consumption is still not strong enough to support the economy and the nation remains vulnerable to a sharp slowdowns in global demand, the public and the government should not underestimate the uncertainties in the global market.
The government should remain vigilant over the potential downside risks to Taiwan's economy generated by the subprime mortgage issue, and be prepared to adopt the appropriate approaches if they materialize. Such measures may include improving the employment rate at home to boost domestic consumption or increasing exports to markets outside of the US.
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
Can US dialogue and cooperation with the communist dictatorship in Beijing help avert a Taiwan Strait crisis? Or is US President Joe Biden playing into Chinese President Xi Jinping’s (習近平) hands? With America preoccupied with the wars in Europe and the Middle East, Biden is seeking better relations with Xi’s regime. The goal is to responsibly manage US-China competition and prevent unintended conflict, thereby hoping to create greater space for the two countries to work together in areas where their interests align. The existing wars have already stretched US military resources thin, and the last thing Biden wants is yet another war.
As Maldivian President Mohamed Muizzu’s party won by a landslide in Sunday’s parliamentary election, it is a good time to take another look at recent developments in the Maldivian foreign policy. While Muizzu has been promoting his “Maldives First” policy, the agenda seems to have lost sight of a number of factors. Contemporary Maldivian policy serves as a stark illustration of how a blend of missteps in public posturing, populist agendas and inattentive leadership can lead to diplomatic setbacks and damage a country’s long-term foreign policy priorities. Over the past few months, Maldivian foreign policy has entangled itself in playing
A group of Chinese Nationalist Party (KMT) lawmakers led by the party’s legislative caucus whip Fu Kun-chi (?) are to visit Beijing for four days this week, but some have questioned the timing and purpose of the visit, which demonstrates the KMT caucus’ increasing arrogance. Fu on Wednesday last week confirmed that following an invitation by Beijing, he would lead a group of lawmakers to China from Thursday to Sunday to discuss tourism and agricultural exports, but he refused to say whether they would meet with Chinese officials. That the visit is taking place during the legislative session and in the aftermath