The most unfortunate issue is the unfair distribution of income, with 1.86 million people on low incomes being forced to eat into their savings to supplement their earnings. Once these savings are used up, the issue of the marked wealth disparity in the country will become more serious.
In this year’s budget there was no mention of any economic stimulus expenditure plans, so the nation’s problems are only going to get worse.
At present there is a large amount of speculative money flowing into Taiwan, putting considerable pressure on the New Taiwan dollar to appreciate and causing an abrupt, yet short-term, increase in the TAIEX.
When this hot money flows out again, the stock market and foreign currency exchange markets — commodities and futures — will be hit twice: High-performing stocks will be bought and sold speculatively, and the financial markets in Taiwan are expected to fluctuate wildly.
In addition, an appreciation in the exchange value of the NT dollar will result in a decline in export volume.
Last year, import volume fell more than expected, leaving the country with a minor trade surplus, but it is unlikely that it will continue to fall this coming year. This could lead to a trade deficit, and if this occurs, Taiwan’s export-driven economy will lose momentum and the likelihood of further economic decline will increase.
In the two quarters from June last year to the present, the South Korean won has appreciated at a higher rate than the NT dollar, giving a boost to the competitiveness of Taiwan’s high-tech exports.
In addition, several local manufacturers have partnered with Japanese high-tech companies, so there are a number of new business opportunities in the offing.
However, China has embarked on a policy of import substitution, and this will further force Taiwanese manufacturers to relocate to China, resulting in falling Taiwanese export volumes.
The agreed implementation of the cross-strait currency clearing mechanism for transactions in NT dollars and the Chinese yuan will push forward cross-strait financial consolidation, expediting the formation of an NT dollar/Chinese yuan dual-currency market in Taiwan. This will promote the internationalization of the yuan, making Taiwan an offshore cross-strait trade hub for the yuan, bringing more business opportunities in terms of cross-strait finance and trade.
Last year, the US’ economic growth rate stuck at around the 2 percent mark and the EU remained bogged down in its economic mire.
The forecasts for the global economy in the coming year offer little optimism.
The Directorate-General of Budget, Accounting and Statistics had to adjust the predicted economic growth rate for last year downward on no less than nine occasions, from an initial guaranteed 4 percent, to a guaranteed 3 percent, down to barely 1 percent.
For the coming year, the forecast is 3.15 percent, with different institutions predicting anything from 3.8 percent to 3.05 percent. Not only is this lower than the past year’s base period, but many people feel this figure is overly optimistic.
Unless there is a conspicuous improvement in the international economic climate and in the absence of any proactive domestic policies, the expectation is that the nation’s economy will continue to suffer in the coming 12 months.