Taiwan’s economy is forecast to expand by 3.59 percent this year, slightly exceeding the Directorate-General of Budget, Accounting and Statistics’ (DGBAS) previous estimate of 3.53 percent. The DGBAS attributed the stronger rebound to improvement in the economy’s two major drivers: exports and private consumption.
Exports will rise at an annual rate of 6.23 percent, rather than 6.07 percent, the government agency estimated last month, with demand for locally made products, such as HTC Corp’s smartphones, expected to be revived amid improving economies in Europe and the US, the DGBAS said on Friday.
Private consumption is forecast to grow by 1.86 percent, inching up from an earlier estimate of 1.83 percent. This indicates that it has contributed less to the nation’s GDP than it used to, another reason for the meager 1.26 percent GDP growth last year.
However, the upgrade on the GDP growth forecast as a whole is still several steps away from the ambitious 3.8 percent target set by the Council of Economic Planning and Development (CEPD).
To reach the CEPD’s forecast, the government must shift its focus from boosting export orders to boosting private consumption, because consumer confidence remains weak.
The consumer confidence index improved slightly to 72.82 last month, primarily because of a better local stock market outlook. However, the index remained below the boom-or-bust level of 100, according to the latest consumer confidence index released by the National Central University, which conducts the survey on behalf of the government.
Credit card group MasterCard’s consumer confidence survey, released last week, also showed that consumers were pessimistic about the nation’s economy. The consumer confidence index in this survey stood at 33.1 points, well below the 50-point threshold and almost all 14 countries and territories MasterCard surveyed in the Asia-Pacific region. Taiwan’s index surpassed only Japan’s 23.7 points.
To stimulate consumer confidence, the government should take more aggressive measures to increase household income. One way to do this would be to raise the minimum monthly wage. The US and China are both planning to increase their minimum wages to spur private spending and thereby their GDP growth.
Earlier this month, US President Barack Obama called for an increase in the minimum wage to encourage employment and accelerate economic growth, while wages in China increased last year in some coastal provinces and Guangdong’s government announced it would raise its minimum wage by about 20 percent from May this year.
The government here has set a precondition before it is willing to consider raising the minimum monthly wage from NT$18,780 to NT$19,047 — 3 percent economic growth for two straight quarters. It looks very likely that the condition will be met next quarter because GDP is forecast to expand 3.26 percent annually this quarter, after growing 3.72 percent last quarter.
However, the government still seems hesitant to raise the minimum wage amid growing pressure from industry, citing the new financial burden of greater employee pension fund contributions. It postponed raising the minimum wage in September last year because of a wobbling macroeconomy and meager export figures. This time, there should be no postponement, given that the global economy is recovering at a stable pace and demand for locally made products has increased.
More importantly, local companies should no longer rely heavily on low wages to attract orders and make profit. The ever-changing economic environment cannot sustain this strategy.