Recent economic data from the world’s major economies have showed that the strength of the economic recovery will likely lose some momentum in the second half of the year, following robust growth in the first six months. Since Taiwan is an export-oriented economy, it should expect to face the same slowing growth as other nations during the second half.
The Directorate-General of Budget, Accounting and Statistics (DGBAS) is scheduled to release its latest economic assessment on Thursday. Whether the statistics agency’s assessment of the economy is a fast pullback or a mild slowdown, no one would deny that the main growth driver of the economy remains the country’s export sector.
Indeed, the Ministry of Finance (MOF) on Monday released statistics showing still-strong export growth for last month — rising 38.5 percent year-on-year to US$23.9 billion and officials said Taiwan’s export sector did not lose steam amid economic headwinds. The ministry now predicts exports in the second half to increase 6.9 percent from the first half and expects full-year exports to grow 34 percent to US$272.98 billion from last year.
Despite concerns about the US and Europe’s economies, officials have assured people that they should have confidence in the economy because of strong Asian demand for Taiwan-made goods.
If so, that means the nation’s economy would still rely solely on the strength of external demand and therefore continue to be impacted by fluctuations in the global economic cycle.
Last week, a Moody’s economist warned in a report that Taiwan has placed all its eggs in one basket, saying the serious setback in foreign demand that hit the nation’s economy one year ago is likely to again haunt this country whenever the global economy stumbles, especially weakening growth in China.
The report said Taiwan’s policymakers actually missed an opportunity during the recession to help shift the nation’s growth drivers toward domestic demand. Rather, Moody’s noted: “Most policies are aimed at supporting manufacturers and the recent trade deal with China cements exports’ dominant role in the economy.”
Moody’s concern over Taiwan’s “industrial monoculture” is not new. Many economists have said that Taiwan’s heavy dependence on exporters and manufacturers in the course of its economic development has created an imbalance within the country’s economic structure and widened the gap between the rich and the poor.
The recent disputes regarding conflicts between environmental protection and economic development and confrontations between industrial safety and business investments reflect the public’s growing discontent with the state of Taiwan’s economy.
Unfortunately, the government’s responses to the disputes over the Central Taiwan Science Park and the Kuokuang Petrochemical project do suggest that policymakers have not changed their export-oriented way of thinking.
Prior to the signing of the Economic Cooperation Framework Agreement (ECFA) with China, the government offered a strong commitment to improve the nation’s exports and further transform Taiwan’s economy through the trade pact. However, will there be a structural adjustment in the economy any time soon? You bet.
The issue is not how many goods Taiwan can sell to China through the ECFA, but how the government can effectively implement the trade pact and therefore boost activities in the domestic consumption and services sector. A more important issue, however, is whether the government and the people here can really start working to reduce our dependence on exports and spur on an economic transformation. In other words, the challenge facing us is not a question of the strength of exports, but a change in mindset with regards to growth.
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