The latest economic data have been a mixed bag of positivity and disappointments. Three months ago, the government adjusted downward its GDP growth forecast for Taiwan this year for the third time, to 2.19 percent, saying exports continued showing weakness and private consumption was not strong enough, a move that had raised speculation over whether GDP growth would reach the 2 percent mark this year.
On Friday last week, the government raised its forecast for GDP growth to 2.46 percent and projected that the economy would expand 2.58 percent next year, reflecting the effect of more companies relocating production lines back home amid the US-China trade dispute.
However, because of the nation’s increased exposure to global trade, it remains vulnerable to slowing global economic growth due to trade tensions, Goldman Sachs Group Inc said in a report on Thursday. It lowered its GDP growth estimate by 0.1 percentage points to 2.3 percent for this year, although that still puts Taiwan ahead of the other Asian Tigers — Hong Kong, Singapore and South Korea.
While higher economic growth is always welcome news, there is a growing sense of relative deprivation, as the income ratio between the highest and lowest 20 percent of households was 6.09 last year, up from 6.07 a year earlier and 6.08 percent in 2016, Directorate-General of Budget, Accounting and Statistics data on Friday showed.
Workers should welcome an increase in the minimum wage for the fourth consecutive year. The Executive Yuan last week approved increases of 3.03 percent in the monthly minimum salary — from NT$23,100 to NT$23,800 — and of 5 percent in the hourly minimum wage — from NT$150 to NT$158 — both of which are to take effect on Jan. 1.
Even so, business representatives have warned that the expected increase in costs for the service and catering industries is likely to be reflected in consumer prices, with the lowest-paid workers to face the most serious threat from an increase in the cost of living.
The economic news from abroad last week was good and bad. On Tuesday, Washington agreed to postpone part of the 10 percent tariffs it had imposed on US$300 billion of Chinese products to Dec. 15, bringing some relief to the global market.
However, on Wednesday, two-year US government bond yields briefly ended slightly higher than that of 10-year bonds, a rare and disturbing development, as it forecasts a recession in the US, based on bond market history.
In Asia, the ongoing protests in Hong Kong might pose a risk to Taiwan’s financial sector, which has a total exposure of NT$1.03 trillion (US$32.84 billion) in the territory. Trade tensions between Japan and South Korea could add more pressure to regional electronics supply chains.
Facing such global uncertainties and economic risks, the government must take a prudent stance regarding budgets in the short term and aim for fiscal discipline in the medium to long term.
Last week, the Executive Yuan unveiled its budget plans for the next fiscal year, in which estimated expenditure would match estimated revenue of NT$2.1 trillion. That means that, for the first time in 22 years, there is to be no deficit and the government will not need to borrow money or issue bonds.
The catch is that the plans do not include the government’s special budgets, which are worth tens or hundreds of billions of NT dollars, such as those allocated to the Forward-looking Infrastructure Development Program.
The government still has work to do to achieve real fiscal balance and lead the nation through turbulent global economic waters next year.
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