Last week, the Directorate General of Budget, Accounting and Statistics (DGBAS) reported the economy expanded by an annual 6.92 percent in the third quarter. It also raised its full-year GDP growth forecast to 5.46 percent for this year from the 4.58 percent it predicted in August.
The stronger-than-expected third-quarter GDP data and the upward adjustment for the year should have been welcome news to the nation and the government should have received credit for this achievement. They did not.
Critics were stunned by the government's economic data, as the 6.92 percent figure represented not only the fastest quarterly expansion in three years but also higher than most economists' forecasts of just above 5 percent. They questioned whether the government had fabricated the numbers to win votes in next year's elections.
The general public also cast doubt on the numbers because most people do not feel they have shared in this growing prosperity given stagnating wages and rising prices.
The fact is that the economy did show steady progress over the year, but the pace of growth lagged behind those of our neighbors and the growth of average monthly wages was far from public expectations. Given that the consumer price index rose 5.34 percent last month and one-year time deposit interest rates are still at about 2.5 percent, people stand to lose nearly 3 percent on their savings if they keep their money in the bank. Even though the central bank has been raising interest rates over the last four years, this wealth-erosion inflation concern has continued to weigh on household savings as well as consumer spending.
There is no clear evidence to support the idea that the government had faked the numbers. Actually, the export sector has been setting records in the past few months that, according to the DGBAS' formula, accounted for 3.1 percent of the third-quarter economic growth -- 2 percentage points higher than its original forecast.
Data from the Ministry of Economic Affairs also showed that strong manufacturing output and better corporate profit growth were behind the positive third-quarter GDP data.
Still, the government should reflect deeply on why the general public could not accept its latest economic figures. People should also reflect on the fact that the government's ability to spur further export growth is rather limited, as high oil prices, the economic fallout from the US credit crunch and Beijing's measures to cool its economy pose increasing economic risks for this nation's export sector.
In other words, there's a potential risk in an economy that increasingly relies on exports and pays less attention to its domestic sector.
To avoid a slowdown in export growth -- which many economists have predicted will begin in the fourth quarter -- that would slash a big chunk of growth from the economy, the government must figure out how to boost development in domestic consumption and investment.
Nevertheless, the unexpectedly high third-quarter GDP data did allow the central bank a much wider leeway for its interest rate adjustment next month to stem inflationary concern and keep financial outflows in check.
But as the government continues to judge the nation's "competitiveness" by looking at the export sector alone, the capital outflow trend will likely continue as long as the policy of maintaining a relatively low NT dollar remains in place.