Taiwan’s economy is not just in a slump, it is in great trouble. Last week, the IMF adjusted the nation’s economic growth figures for this year downward by almost 1 percentage point, leaving it only just above 3 percent. Then the Directorate-General of Budget, Accounting and Statistics (DGBAS) announced the economic growth figures for the first quarter of this year, putting it at 1.54 percent, 1.72 percentage points below its original forecast of 3.26 percent. That economic growth has been adjusted downward by more than 50 percent is evidence that President Ma Ying-jeou’s (馬英九) administration has misjudged the situation and that the economic problems are more than just a matter of short-term economic trends — there are some major long-term issues.
The list of the Ma administration’s miscalculations is long. Half a year ago, Ma repeatedly said that in September last year, positive signs for Taiwan’s economy had begun appearing, and that he could now “see the light at the end of the tunnel.”
Following that, DGBAS Minister Shih Su-mei (石素梅) said that things were looking up for Taiwan. Council for Economic Planning and Development Minister Kuan Chung-ming (管中閔) said with some emphasis that economic growth of 3.8 percent for the year would not be a problem, and that it might even exceed 4 percent, while unemployment would fall below 4 percent.
Now the economic forecasts by some of the government’s highest officials have blown a hole in all these predictions, along with the government’s credibility.
Using inflated government figures that cannot stand up to scrutiny to deceive the public is par for the course for the Ma administration, and it is resorting to doing so with increasing frequency.
There are data to show that economic growth has continued to drop in every quarter for the past two years, and in particular during the year from the fourth quarter of 2011 to the third quarter of last year, when economic growth hovered between just over 0 percent and 1 percent, even falling below zero in the second quarter. When things started looking slightly better during the fourth quarter last year, the government thought that, given to the low base of comparison, the figures would look better for this year, and government officials began to exaggerate the situation and play up their economic forecasts.
The government has learned this trick from its past successful deceptions. Ma took office in 2008, and that year, economic growth halted at 0.73 percent. The following year was even worse, as the economy contracted by 1.81 percent, the nation’s worst performance on record. In 2010, Ma’s third year in office, the economy rebounded and grew by 10.76 percent after two years of deplorable figures. The government saw this as proof of its ability, and since then it has been bragging about how it “created” economic growth of more than 10 percent. It is now repeating the same trick, allowing itself to be made a fool of by the constantly changing economic climate.
Apart from the current economic slump, the overall economy is facing a fundamental and long-term problem that is even more worthy of our attention.
With the exception of the strong economic rebound during Ma’s third year in office, the government has only barely managed to maintain more than 4 percent growth for one year in the past five. Economic growth in the remaining three years was anemic, and during the first quarter of this year, it has been possible to see the causes of most problems: sluggish exports and weak domestic consumption.
From a short-term perspective, the sluggish exports are evidence that the international economic situation remains unstable. Economic growth in the US looks better in the short term than for the long term, and it is unlikely to remain above 3 percent. Unemployment in the eurozone stands at more than 12 percent and even Germany has begun to show signs of a recession. Apart from Taiwan’s international competitiveness being weakened by industrial innovation and marketing problems, there is also the excessive focus on China, as pointed out by the minister of economy. It has meant that Taiwanese companies have not been aggressive in the US and European markets and that they have ignored emerging markets, the markets which have seen the largest growth in demand in recent years. As China’s economic growth has passed its peak, its and Taiwan’s industries are moving from complementing each other toward competition. If Taiwan continues to deceive itself with the illusion that China is the world’s largest market and sticks to the mindset of the old “move west” policy, it is asking for trouble.
Since the signing of the Economic Cooperation Framework Agreement with China, the government has bet everything on China and that is the main source of Taiwan’s current economic problems.
Taiwan does not lack capital or talent, but the government is incapable of promoting investment to revitalize the economy. Instead, capital and talent are fleeing the country.
Together with last year’s electricity and fuel price hikes and the capital gains tax on securities transactions, the result has been that the economy has been deserted and private consumption and investment have weakened, leading to falling economic output and anemic economic growth.
Even worse, the government lacks the ability and the determination required to meet this challenge and revitalize the economy. The public, which has seen through the government’s tricks, is losing faith in the economic outlook.
Japanese Prime Minister Shinzo Abe is implementing his “Abenomics” approach in a bid to use currency, fiscal policy and growth promotion strategies to revitalize the Japanese economy, which has been in a slump for several years. Despite the risks, his efforts and determination to change the current situation have met with praise. Taiwan’s economy, on the other hand, is in the hands of Ma, and with the exception of big talk, empty slogans, broken promises, ineptitude and Sinicization, he is incapable of doing anything to meet the long and short-term challenges facing the economy. The public cannot simply sit by and wait in anticipation: It must take action.
Translated by Perry Svensson
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