On May 15, the Directorate General of Budget, Accounting and Statistics announced the economy had grown 0.39 percent in the first quarter of this year.
At the same time, it reduced its growth forecast for the year from 3.38 percent to 3.03 percent. In the middle of last month, several economic forecasters lowered their forecasts for the nation’s growth this year.
Almost every economic forecast institution around the world is pessimistic about economic prospects this year. Europe’s economy is in a quagmire. The US economy is weak. Emerging economies are not as vigorous as they were. China faces economic adjustments and slower growth. Brazil’s economy has slowed down and India’s economy remains stuck in a bottleneck. Russia is suffering an increasing impact from the European recession and is no longer thriving.
The first half of this year has seen slack economic performance around the world and quite a lot of countries are setting in motion a second wave of stimulus measures following those implemented in response to the 2008 global financial crisis.
In the first half of this year, Taiwan’s economy has been in a state of near stagnation.
Export growth was negative from January through May, and dropped 6.1 percent in May compared to the same month last year, but its export surplus was up by 83.9 percent.
Analysis reveals that last year’s trade deficit resulted from a big increase of 33.3 percent in imports of capital equipment, while this year’s trade surplus comes from a 10.5 percent drop in imports, which is greater than the 6.3 percent fall in exports.
Of these, imports of capital equipment fell sharply, by 20.5 percent, indicating that businesses have been investing less, which means that production is set to fall still further over time.
Further observation reveals that the situation has remained basically the same since November last year; the drive behind exports has been getting weaker and the economy has almost sputtered to a stop.
The Council for Economic Planning and Development’s overall monitoring indicator has flashed a blue light, indicating a recession, for seven months in a row.
The annual rate of increase in the central bank’s M1B money supply fell to between 3.8 percent and 2.7 percent, well below earlier levels of between 8 percent and 9 percent. At the same time, financial institution lending fell markedly. These are all warning signals of an economic slow-down.
Unfortunately a presidential election was held while this was going on, so officials are only now seeing the problem.
The Cabinet’s declared policy is that it will continue with its seven major short-term response strategies: stabilizing finance, holding down prices, increasing employment, promoting investment, helping industries, pepping up consumption and boosting exports, and it is asking ministries to draw up medium-to-long-term plans to speed up the reshaping of the economy. The government’s overall strategy for responding to changes in the international economic climate is centered on institutional or structural adjustments and legal deregulation.
Among the Cabinet’s list of policies, those promoting investment and boosting exports have clearly been ineffective. Increasing employment and pepping up consumption are also easier said than done in a poor economic climate.
As for stabilizing finance, the stock market has been dancing to the tune of the European debt crisis, so instability prevails despite all efforts to stabilize the market. Interest rates remain low and banks are increasingly reluctant to provide loans for industry and commerce, but the government has not come up with any tangible measures to encourage lending.