The Directorate-General of Budget, Accounting and Statistics announced in the middle of last month that Taiwan’s economy contracted 8.36 percent year-on-year in the last quarter of last year.
The “year-on-year” approach to comparing annual GDP growth is favored by many developing countries. Advanced economies, on the other hand, prefer to work out the quarterly growth rate by comparing real GDP for a given quarter with that of the previous quarter and then calculating the quarter-to-quarter annualized rate in accordance with compound growth to better reflect the latest trend in the economic climate.
The US Department of Commerce announced late last month that the economic growth rate had fallen drastically to minus 6.2 percent for the last quarter of last year rather than the predicted minus 3.8 percent.
This figure is the quarter-to-quarter annualized rate, which gives the most up-to-date reflection of the state of the US economy and the degree of recession.
Thus, based on the value of the US dollar in 2000, the US’ real GDP contracted 1.6 percent from US$11.724 trillion in the third quarter of last year to US$11.525 trillion in the first quarter of this year. This percentage is the quarterly growth rate.
With the calculation of compound growth, it represents a quarter-to-quarter annualized rate of minus 6.2 percent.
This is the figure given in English-language media for the US economic growth rate for the last quarter of last year.
If the US were to employ Taiwan’s calculation method, its economic would be reported as having contracted only 0.82 percent year-on-year in the last quarter of last year, which fails to represent the seriousness of the situation.
Such a slight contraction could hardly reflect the serious decline that actually took place in the US economy in the last quarter.
On the other hand, if Taiwan were to employ the US calculation method, its economic growth rate for the last quarter of last year would be close to minus 20 percent.
In other words, Taiwan’s real GDP contracted 5.4 percent compared with the previous quarter and this figure can be converted into a quarter-to-quarter annualized rate of minus 19.9 percent in accordance with compound growth.
This figure shows the real seriousness of the decline.
To get a global picture, I have compared the economic growth rates of the four Asian tigers and the world’s leading economies in accordance with the two different reporting methods described above, as favored by developing and developed countries respectively.
The quarter-to-quarter annualized rate reflects the current state of an economy more accurately than does the year-on-year figure.
Overall, the situation in East Asia is more serious than that in the US or Europe. As for China, although its economic growth rate for the last quarter of last year was 6.8 percent year-on-year, in fact its economy can be judged to have been stagnant or even in recession when compared to the previous quarter.
I must also point out that, in Taiwanese media’s business news, reporters have been known to mix up figures for annual economic growth rate with the quarter-to-quarter annualized rate.
This practice leads to false comparisons that may mislead the public and it should therefore be corrected.
Hwan C. Lin is a research fellow at the Taiwan Public Policy Council and an associate professor of economics at the University of North Carolina.
TRANSLATED BY EDDY CHANG
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
Former president Ma Ying-jeou’s (馬英九) trip to China provides a pertinent reminder of why Taiwanese protested so vociferously against attempts to force through the cross-strait service trade agreement in 2014 and why, since Ma’s presidential election win in 2012, they have not voted in another Chinese Nationalist Party (KMT) candidate. While the nation narrowly avoided tragedy — the treaty would have put Taiwan on the path toward the demobilization of its democracy, which Courtney Donovan Smith wrote about in the Taipei Times in “With the Sunflower movement Taiwan dodged a bullet” — Ma’s political swansong in China, which included fawning dithyrambs