Taiwan’s excess savings — gross domestic savings minus gross domestic investment — have continued to soar in the past few years as Taiwanese households and businesses opted to hang on to their money rather than invest or spend in the country. While the government’s incentive investment programs, launched in 2019 amid US-China trade disputes, have helped spur domestic investment by Taiwanese firms, coupled with semiconductor companies’ continued investment in advanced processes, the savings have increased much more over the years.
In its latest forecast, the Directorate-General of Budget, Accounting and Statistics predicted that Taiwan’s excess savings this year could surpass NT$4 trillion (US$133.8 billion) for the first time, reaching NT$4.09 trillion, while the ratio of excess savings to GDP would be 15.25 percent. Although the ratio is forecast to be lower than last year’s 15.42 percent, it is still expected to top other Asian nations again.
Excess savings reflect Taiwan’s strong exports and a wider account surplus. Given that the trade surplus in the first five months of this year reached US$43.45 billion, an annual increase of 38.3 percent — with the current account surplus expected to also hit another new high this year — excess savings are poised to remain high. That would show resilience in the nation’s economy in the face of US President Donald Trump’s unpredictable trade policy and international macroeconomic uncertainty. Excess savings can support Taiwan’s financial markets in countering volatility from capital inflows and outflows by foreign institutional investors. With the return of foreign funds since late April, there is a clear uptrend in the New Taiwan dollar’s exchange rate and also abundant liquidity building in the domestic banking system. The developments would provide solid pricing support for NT dollar-denominated assets.
To some extent, high excess savings indicate a surplus of idle funds. Corporations might have adopted a wait-and-see approach to investments amid disruptions caused by Trump’s tariff policy. The government should respond with initiatives to encourage domestic investment or spending, as well as adjustments in monetary or fiscal policy. The central bank has outlined three strategies to decrease excess savings by encouraging domestic investment: expanding the capacity of build-operate-transfer projects for major public infrastructure; directing private capital toward the financial services and wealth management industries to enhance the local financial industry; and encouraging manufacturers to leverage their excess savings for cross-border mergers and acquisitions to acquire key technologies and strategic resources, and climb up the global value chain.
Economists have said the central bank should lower interest rates to boost the incentive for investment, as well as promote consumption, given that savers would be more willing to take some money out of the bank. However, if the funds are not directed toward public construction or other economic activities, but instead flow to the real-estate or stock market, it would risk further driving up housing prices or inflating a stock market bubble. That creates social and economic imbalances that could hinder the nation’s long-term development.
The government’s Trillion NT Dollar Investment National Development Plan, unveiled by the National Development Council in December last year, aims to attract private funds to public construction projects, while addressing regional development imbalances. However, issues such as locating new investment, overcoming regulatory hurdles and other red tape, and modes of cooperation between the public and private sectors might continue to impede investors’ willingness. The government should communicate better with potential investors and quickly remove regulatory barriers, which would help address the excess savings bubble and help fuel the economy’s next phase of growth.
In a summer of intense political maneuvering, Taiwanese, whose democratic vibrancy is a constant rebuke to Beijing’s authoritarianism, delivered a powerful verdict not on China, but on their own political leaders. Two high-profile recall campaigns, driven by the ruling party against its opposition, collapsed in failure. It was a clear signal that after months of bitter confrontation, the Taiwanese public is demanding a shift from perpetual campaign mode to the hard work of governing. For Washington and other world capitals, this is more than a distant political drama. The stability of Taiwan is vital, as it serves as a key player
Much like the first round on July 26, Saturday’s second wave of recall elections — this time targeting seven Chinese Nationalist Party (KMT) lawmakers — also failed. With all 31 KMT legislators who faced recall this summer secure in their posts, the mass recall campaign has come to an end. The outcome was unsurprising. Last month’s across-the-board defeats had already dealt a heavy blow to the morale of recall advocates and the ruling Democratic Progressive Party (DPP), while bolstering the confidence of the KMT and its ally the Taiwan People’s Party (TPP). It seemed a foregone conclusion that recalls would falter, as
The fallout from the mass recalls and the referendum on restarting the Ma-anshan Nuclear Power Plant continues to monopolize the news. The general consensus is that the Democratic Progressive Party (DPP) has been bloodied and found wanting, and is in need of reflection and a course correction if it is to avoid electoral defeat. The Chinese Nationalist Party (KMT) has not emerged unscathed, either, but has the opportunity of making a relatively clean break. That depends on who the party on Oct. 18 picks to replace outgoing KMT Chairman Eric Chu (朱立倫). What is certain is that, with the dust settling
Mainland Affairs Council Deputy Minister Shen You-chung (沈有忠) on Thursday last week urged democratic nations to boycott China’s military parade on Wednesday next week. The parade, a grand display of Beijing’s military hardware, is meant to commemorate the 80th anniversary of Japan’s surrender in World War II. While China has invited world leaders to attend, many have declined. A Kyodo News report on Sunday said that Japan has asked European and Asian leaders who have yet to respond to the invitation to refrain from attending. Tokyo is seeking to prevent Beijing from spreading its distorted interpretation of wartime history, the report
RSS