Wed, May 29, 2013 - Page 1 News List

Two economists question effectiveness of Cabinet plan

By Amy Su  /  Staff reporter

The Cabinet’s new stimulus measures may not provide a significant boost to the economy this year, economists said yesterday.

“The government did not prescribe the right medicine for the local economy’s illness,” National Taiwan University economics professor Kenneth Lin (林向愷) told the Taipei Times by telephone.

Lin said sluggish sentiment in private consumption would be the major factor dragging down economic growth this year, following the sector showing just 0.35 percent expansion year-on-year in the first quarter.

The government’s four measures for boosting private consumption have nothing to do with creating job opportunities or raising wages for the public — the key factors for boosting consumption, Lin said.

As for the investment sector, the new measures also fail to fully satisfy the need of domestic life insurance firms, he said.

Many life insurers are interested in investing in renewable energy resources, which would not only raise private investment, but also generate a higher rate of self-sufficiency for the nation, he said. However, the government’s measures would be too narrow to raise real investments from the private sector, he said.

It will be difficult for the nation to reach 2 percent growth in GDP this year given a lack of determination on the part of the government, never mind the Cabinet’s 3 percent target, he said.

“I haven’t seen any sign of recovery thus far,” he said.

However, Wu Tsai-yi (吳再益), president of the Taiwan Research Institute (台灣綜合研究院), said he thinks the government’s stimulus measures will help.

“In terms of consumption, the government’s measures may boost a large amount of expenditures from the private sector by paying a small amount of subsidies,” Wu said by telephone.

How fast the government can provide the money to support the measures will be the key to their effectiveness, because the government will have to use state-run funds or the national budget to execute most of these stimulus methods, Wu said.

It may still be a challenge to reach the 3 percent growth goal, but the stimulus measures and faster-than-expected economic recovery in the US could help boost GDP this year, he added.

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