Two sets of economic data released last week by the Directorate-General of Budget, Accounting and Statistics (DGBAS) have drawn mixed reactions from the public: One on the nation’s economic performance in the first quarter of the year and the other on Taiwan’s household wealth distribution in 2021.
GDP growth for the first quarter was faster than expected, at 6.51 percent year-on-year, an acceleration from the previous quarter’s 4.93 percent and higher than the agency’s February estimate of 5.92 percent.
It was also the highest growth since the second quarter of 2021, when the economy expanded 8.07 percent, DGBAS data showed.
The growth drivers in the first quarter were exports of goods and services, as well as private and government consumption. The growth was also partly due to a lower comparison base a year earlier when the economy posted a steep 3.49 percent annual decline.
Nonetheless, the better-than-expected GDP showing in the first quarter prompted the DGBAS to raise its growth forecast for this year from 3.43 percent to 3.57 percent.
Meanwhile, the wealth gap showed a stark increase, with the top 20 percent of households holding 62.68 percent of total wealth while the bottom 20 percent accounted for a mere 0.94 percent, DGBAS data showed. Moreover, the gap surged from 16.8 times in 1991 to 66.9 times in 2021.
The deteriorating distribution of wealth over the past 30 years caught people off guard, particularly because the income ratio of the highest earning 20 percent and the lowest earning 20 percent had widened less significantly from 4.95 in 1991 to 6.15 in 2021.
In economic terms, wealth is the sum of a person’s assets (including deposits, stocks, houses, vehicles and other transfers) minus liabilities, and is a stock concept, while income is a flow and refers to what a person receives over a given period, say a year, without taking into account capital gains from stock or real-estate investments. The two terms are related, but the distribution of wealth is characteristically more unequal than the distribution of income.
The reasons behind the fast widening of the wealth gap include increasing wage differences across sectors, rising prices of homes and rentals, elevated stocks and other assets, and growing mortgage burdens, the DGBAS said.
In particular, the bottom 20 percent of households had an average debt of NT$4.05 million (US$125,205) in 2021, which was much higher than other groups and the national average of NT$2.2 million, as these households borrowed money to buy houses or to invest in financial assets, the agency said.
In summary, the wealth distribution data showed that holding financial assets and real estate makes rich people richer, while excessive borrowing tends to drive people into poverty. Given the rising house price-to-income ratio, once young people buy a property, they can easily fall into the bottom 20 percent due to mortgage burdens.
The distribution of income is easier to measure and is more frequently used as a gauge than the distribution of wealth, which explains why the statistics agency has continued to conduct its surveys on family income and expenditure every year for six decades, but only released its wealth distribution reports twice — once in 1992 and the other last week.
As the latest wealth distribution data shed light on income inequality and the composition of assets held by different groups, the DGBAS should release such data regularly, say every four to five years instead of another 20 to 30 years, as this would allow the government to examine the changes across fixed periods, analyze the results and respond with the necessary measures.
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