When assessing the vitality of Taiwan’s economy, many commentators first look at the performance of the local bourse, whose present state gives them cause for optimism. As foreign investors continued to move funds into the market, the TAIEX ended the first quarter with a 6.03 percent sequential advance. While the market seems to have been consolidating in the past few sessions, it still might soon surpass 10,000 points. In addition, the New Taiwan dollar rose 6.35 percent against the US dollar in the first three months of the year to reach its strongest level since September 2014.
It is true that the nation’s currency and benchmark index performed better than those of their Asian peers, but the local bourse does not represent the whole economy and it is not an accurate guide to the public’s expectations.
So, how is the economy doing?
Based on a slew of economic data released by the government, it seems that the economy is growing steadily. For instance, in February, the official manufacturing purchasing managers’ index indicated expansion for the 12th consecutive month; industrial output registered its seventh consecutive month of annual expansion; export orders showed their seventh consecutive month of annual expansion and the government’s business climate monitor flashed “green” — indicating steady growth — for the eighth consecutive month.
Other positive developments are that both unemployment and inflation remain stable and relatively low.
However, a public sense of well-being is not necessarily inferable from the numbers. Even though data seem to indicate an energetic and dynamic economy, in reality the decline in real wage growth has continued to depress domestic demand. According to the latest figures, retail-sector revenue declined annually in the first two months of the year, with growth in new-car sales over the period nearly flat. While on paper there was a noticeable improvement in housing transactions in the first two months, that might have more to do with a slump in the real-estate industry last year.
Certainly, a difference exists between what economic metrics indicate and how ordinary people actually feel about their circumstances. One explanation is that it is difficult to grasp the real state of the economy from the so-called “lagging indicators” available — such as the unemployment rate, gross income, the consumer price index, the industrial production gauge and GDP — especially during the early stages of an economic recovery. Even so, what is less clear is whether the early stages of recovery are strong enough yet to allow the nation’s “progress” to trickle down to the public and to enable corporations to share their earnings with their employees.
For the public to have confidence in the economy, the government must offer a vision, as well as concrete economic policies. The infrastructure plan to be implemented over the next eight years is a move in the right direction, but it does not look like it will substantially benefit growth in the near term, especially when there is a significant time lag from legislative process to project planning to final implementation. More importantly, the government has to ensure policy stability. It must also avoid doing anything that damages perceptions of its policy formulation and execution capabilities.
With the nation’s economy in a fairly strong position at the end of the first quarter, economists have revised GDP growth estimates for this year up to at least 2 percent. While the figures might suggest things are improving, the public fears missing out on such intangible growth.
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