It is time for businesses to host banquets and give out gifts to their employees as the year’s end approaches. Year-end banquets are for many Taiwanese an opportunity to reflect on their hard work and the blessing of having a job amid a sluggish economy.
However, even those who are fortunate enough to enjoy a feast with a group of colleagues may still feel sad about the stagnation of wage growth over the past several years. During the first nine months of this year, real wages after adjustment for inflation declined 1.1 percent year-on-year and regressed to the same level they were at 15 years ago, according to the latest government figures.
One of the great challenges in this export-reliant nation is to create more jobs with higher salaries for young people. Our economic problems did not appear from nowhere and they are not likely to vanish anytime soon, regardless of who sits in the Presidential Office or who takes the helm of the Cabinet.
A failure to ensure decent jobs and higher consumption is a serious threat to economic progress. Therefore, it is difficult not to pay attention to the latest GDP data released by the Directorate-General of Budget, Accounting and Statistics (DGBAS) on Friday, which show the growth of private consumption expanding this year by the slowest pace since 2009.
Private consumption is a key component of GDP, but consumer spending has been so low in recent years that single-digit annual increases have become the norm, and this is not sufficient to support the economy. This year, according to the DGBAS forecast, growth in private consumption is likely to decline to 1.46 percent from 1.62 percent last year and 3.10 percent in 2011.
The latest economic data also indicate weak growth momentum in other GDP components such as private investment, government spending and net exports (exports minus imports). Although there are signs that private investment will increase 5.32 percent this year and 4.37 percent next year after two consecutive years of contraction, the strength of private investment is not sufficient to offset broad-based weaknesses in other components.
For now, the DGBAS expects the economy to expand 1.74 percent year-on-year this year, which is lower than the 2.31 percent it estimated in August and represents the second straight year of GDP growth of less than 2 percent.
One reason the economy is struggling this year is that exports are likely to contract 2.03 percent year-on-year this quarter, while full-year exports will likely only increase by 0.44 percent from last year. There is no doubt that deteriorating external demand is adversely affecting domestic investment and private consumption.
It is important to note that two factors leading to weaker export performance are increasing competition from China and the information technology orientation of the nation’s industrial structure, which is more prone to market volatility than at any other time in recent years.
The government’s efforts to set up “free economic pilot zones,” secure free-trade agreements with New Zealand and Singapore, and ink more trade pacts with China under the Economic Cooperation Framework Agreement show that policymakers want to open up and stimulate economic growth. However, the stable export growth that fueled economic development over past decades is losing steam, and China is becoming a competitor.