The IMF recently revised upward global economic growth forecasts. This included an increase in the growth forecast for Taiwan to 7.7 adercent. The government was all over this news, using it as evidence that its promised “Golden Decade” was on the horizon. The pro-unification media also claimed the new figure meant that Taiwan’s economic growth rate was now higher than that of South Korea. They also said that this highlighted the poor record of the previous government. The problem is, this just isn’t true.
The seemingly healthy growth rate of 7.7 percent is the result of the economy bouncing back following a deep dip. If you look at it more closely, you see that Taiwan’s economic growth rate compares badly with that of South Korea or any of the other “Asian Tigers,” and we are not in as good a situation as one might expect from looking at the rate in isolation.
The truth of the matter is that, according to IMF statistics, Taiwan’s economic growth last year was minus 1.91 percent, South Korea’s was 0.2 percent and Singapore’s was 1.3 percent. IMF forecasts for this year forecast rates of 7.7 percent, 5.7 percent and 9.9 percent respectively.
At first glance, Taiwan seems to have done better than South Korea. However, if we look at 2008, the year the Chinese Nationalist Party (KMT) won the presidential election, as a base of 100, then the 7.7 percent increase to this year gives a new index of 105.64. This is marginally worse than a comparable index for South Korea, at 105.95, and much worse than Singapore’s 108.47.
In other words, this apparently miraculous growth rate is simply the result of rebounding from a deeper trough than these other countries. There is nothing miraculous about it. On the contrary, it is proof that Taiwan’s economy has been buffeted more by external factors than other countries. This is because Taiwan has put all its eggs in one basket, and become far to reliant on one market — China.
IMF analysts seem to be aware of this vulnerability, which is why they also predicted a growth rate of only 4.3 percent for next year, lower than the 5 percent forecast for South Korea, 4.9 percent for Singapore and 4.4 percent for Hong Kong. What the IMF figures show clearly is that Taiwan’s economy isn’t really experiencing anything out of the ordinary.
If free-trade with China is a panacea for all our economic problems as the pan-blue camp maintains, then why after two years of opening up, greater deregulation and closer ties, is Taiwan falling behind? Every time a new measure is announced people carp on about investors’ newfound interest in Taiwan, wax lyrical about how the salmon are returning upstream to their place of birth, bleat endlessly about the stock market index sailing past 10,000 points with 20,000 points on the horizon.
How many people are going to fall for such “irrational exuberance?” Will the signing of the Economic Cooperation Framework Agreement (ECFA) mean that President Ma Ying-jeou’s (馬英九) so-called “6-3-3 policy” — annual GDP growth of 6 percent, annual per capita income of US$30,000 and an unemployment rate of less than 3 percent — actually work? I guess we’ll just have to wait and see.
At this stage, what we can say is that the IMF has rather more conservative expectations of the ECFA than some of its supporters in Taiwan. Otherwise, why would they have ranked us lower than the other Asian Tigers in their economic growth forecasts for next year?
Huang Tien-lin is a former national policy adviser.
TRANSLATED BY PAUL COOPER
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