The year is drawing to an end. Whether or not the nation’s economy gets off to a strong start next year, we should take a moment to appreciate the resilience shown by the economy in the last quarter of this year after slumping in the first three quarters amid global economic weakness, unfriendly government policies and a lack of confidence in the political leadership.
For most of this year, the economy has suffered the impact of a slowdown in China, a recession in Europe and a lackluster economic recovery in the US. However, it was the government’s plans to raise energy prices and levy a capital gains tax on stock investments that negatively affected market sentiment and economic momentum, causing the GDP to grow by just 0.59 percent.
While GDP is estimated to increase 2.97 percent in the last quarter, on the back of recovering exports amid a stabilized global economy, the economy is likely to expand just 1.13 percent for the whole of this year, according to the government’s forecast.
Rising inflationary pressure was once a concern, following the government’s announcement in April that it would raise prices of electricity and petroleum-based fuels, with the consumer price index rising above the monetary policymakers’ 2 percent growth target for the four months starting in July. Fortunately, falling prices for vegetables and fruit, plus the government’s decision in September to delay the second-phase increase in electricity rates to October next year, have helped keep the inflation rate on target this year.
The issue of energy price hikes has served as a catalyst for the public and lawmakers across party lines to closely scrutinize the management efficiency of state-run enterprises, like Taiwan Power Co and CPC Corp, Taiwan, and demand accountability from the government.
However, the government’s plan to launch a capital gains levy on stock investments next year left an ugly mark on the local bourse, resulting in plunging daily market turnover, weakening market sentiment and a finance minister resigning. Despite the TAIEX recovering in the final quarter, the implications of this unfavorable tax policy, along with the government’s plan to levy a 2 percent supplementary premium on income earned from stock and cash dividends, has kept some investors away from the market.
Nevertheless, the nation has moved to make the real-estate market fairer by implementing the registration of actual real-estate transaction prices in August, in the wake of rising public discontent over high housing prices and widening income disparities becoming a major issue.
Great strides were achieved in resumed trade talks between Taiwan and the US after the two sides resolved the controversial issue of ractopamine residue in beef and the currency clearing mechanism between Taiwan and China, following the passage of a cross-strait agreement in late August. Smartphone brand HTC also reached a 10-year patent truce with iPhone maker Apple last month, enabling the Taiwanese firm to focus on innovation and contribute to exports.
Despite all this progress, the problems of an over-concentration of exports of information technology, increased overseas production and weakened investment by the public and private sectors will pose challenges for the economy next year in terms of employment and private consumption. Uncertainties still exist about the implementation of the securities capital gains tax and the second-generation national health insurance program at the start of next year, the pace of global recovery and the government’s measures to revitalize Taiwan’s economy.
All told, this year was one of significant changes for the economy, but it will be history. For now, one may have great hopes for the coming year, but there is a steep, uphill road ahead for the nation, which demands that the government take action in a balanced and measured way to deal with thorny domestic issues and challenging global conditions.