The government has proposed a new consumer subsidy program aimed at stimulating the economy, after GDP contracted for the first time in six years, falling 1.01 percent in the third quarter from the same period last year. However, the plan, which is set to cost more than NT$4 billion (US$121.9 million), might be a waste of money, as the official in charge of the program said that it would only bring minimal benefits.
Despite promises that the program would boost the economy, the government has to accept that its efforts have been ineffective in stopping economic figures from falling, let alone spurring growth.
Premier Mao Chi-kuo (毛治國) said on Friday that he had developed a program to subsidize certain energy-saving electric appliances, such as refrigerators, TVs, electric kettles and washing machines, and encourage mobile phone users to upgrade from 2G to 4G in the hope of stimulating the economy.
National Development Council Minister Woody Duh (杜紫軍) said the government expects the program to add 0.1 percentage points to the GDP growth rate.
And that is the government’s forecast; the actual outcome might be lower.
Even if the result meets — or exceeds — the expected figure, it is likely to be a temporary fix, without any long-lasting effects on the economy.
It would be a waste of taxpayers’ money in a time when the nation is deeply indebted, because the actual purpose of the program is to allow government officials to say: “Look, we are not doing too badly.”
The program might remind some people of the NT$3,600 vouchers that the government handed out to every identity card holder or permanent resident in 2009, when the nation was in the middle of an economic recession.
At the time, the government expected the vouchers to spur consumption and add 0.66 percentage points to GDP growth. However, most people used the vouchers to purchase things that they had already planned to buy, so the program added only 0.28 to 0.43 percentage points to annual GDP growth.
Duh defended the new subsidy program, arguing that it would have a 10 times bigger economic impact than the vouchers.
He said that a NT$2,000 subsidy for refrigerators would encourage people to buy refrigerators priced at NT$22,000. In such a case, they would spend NT$20,000 from their pockets and the NT$2,000 subsidy would create 10 times the spending.
The problem is, who would buy a new refrigerator that costs NT$22,000 just because the government is providing a NT$2,000 subsidy? The most reasonable scenario would be that the person has already decided to buy a refrigerator and applied for the NT$2,000 subsidy to save money, while those who have no need to buy a refrigerator would not spend anything.
In June 2009, one year after President Ma Ying-jeou (馬英九) took office, the government issued consumer vouchers in an attempt to boost the economy, but failed. Today, with only a few months until the end of Ma’s second term, the government has come up with a similar idea.
This shows two things: First, Ma’s campaign promise in 2008 to maintain average annual economic growth of 6 percent is doomed, and second, the government has not progressed in the past eight years.
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