Monday, January 12, 2009

Rescuing the Economy: Plan for the Worst, Hope for the Best

Rescuing the Economy: Plan for the Worst, Hope for the Best
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
January 12, 2009

The latest trade statistics, released in December, show that the government has again underestimated the impact of the global financial crisis on the economic outlook. Now, in the face of an even worse economic chill, the government can no longer afford to sit by and watch. It can no longer afford to be complacent. It must plan for the worst, while hoping for the best. It must redouble its efforts to rescue the economy.

Last week the Ministry of Finance announced that December exports totalled only 13.6 billion USD, 42% less than the same month two years ago. This established a new record for the largest monthly decline in history. The DGBAS initially estimated that exports would decline 8% compared to the previous quarter. It has now increased that estimate to 25%. This means the economy declined even more than the 1.7% expected during the previous quarter. These numbers raise at least three warning flags. One. The economy is rapidly deteriorating. Two. The government overestimated the last quarter's economic performance. Three. Maintaining a growth rate of at least 2% this year will be difficult. The risk of recession is rising. Its duration may be longer.

This is not the first time the government has misjudged the situation. The last time was in August, just before the financial crisis struck. July showed symptoms of a deficit. But a still optimistic DGBAS nevertheless forecast a growth rate above 3 percent for the second half. Therefore it was unprepared for the coming crisis. It was unable to implement countermeasures to increase domestic demand and to build local public infrastructure. Its administrative efficiency was low. It has now blundered again. This means its previous programs to revitalize the economy were already inadequate. Naturally they are also in adequate to meet future needs. The government's efforts to rescue the economy must be redoubled and accelerated to resist the impact of the recession.

Less than half an hour after the central bank released its export data, it announced an emergency rate cut of 0.5%. It allowed the discount rate to fall to 1.5%, only 0.25% above the historic low. It wanted to keep interest rates low to defend the NTD and prevent further deterioration in exports. But interest rates and exchange rates are a double-edged sword. Set them too low and they will do Taiwan's economy more harm than good. The central bank has no more room for interest rate cuts. The next step may be to print banknotes and stuff them into people's pockets. The U.S. Federal Reserve is already doing this. But the side effects are serious. The central bank will resort to it only as a last resort.

Now that the effectiveness of monetary policy has been exhausted, governments are redoubling their efforts to rescue their economies. Take United States President-elect Barack Obama's economic stimulus package. Unemployment and retail sales have hit record lows. The size of the package has increased from 200 billion USD when Obama was elected, to one trillion USD. During Bush's term of office, Congress passed a 700 billion USD injection of liquidity into the market. Altogether the United States has invested 8.5 trillion dollars in rescuing its economy. This is more than it spent on all its wars combined. Clearly the United States considers the economic recession "Public Enemy Number One."

Mainland China has decided to spend nearly 600 billion USD to stimulate domestic demand. Local governments have also redoubled their efforts. The Eurozone has approved the use of at least 1.5% of its GDP, approximately 180 billion USD, to stabilize demand within the region. Japan, South Korea and India have also been steadily increasing the size of their stimulus packages. All these moves indicate that the swiftness of the economic decline exceeded all expectations. Will it become a second Great Depression? In order to combat indifference, governments are clearly anticipating the worst. Better too much than not enough. Better late than never.

Yet on Taiwan, even after the export statistics were announced, only the central bank took action. The Ministry of Economic Affairs, whose direct responsibility is to address such matters, expressed "surprise." Its plans for stimulation of demand remained unchanged. At the Executive Yuan meanwhile, Premier Liu Chao-shiuan, after passing this year's economic reconstruction plans, gave himself a pep talk. He said there was no room for pessimism. At the same time he offered no policy in response. When speaking to the public, the government cannot of course be pessimistic. But when facing problems, the government must anticipate the worst. Only such pessimism can force one to treat problems more seriously, anticipate them a little earlier, and deal with them in greater depth. Bit by bit, one can narrow the gap between policy and implementation, avoid nasty surprises, and give Taiwan the opportunity to rejuvenate its economy more rapidly.

Therefore the government must act immediately. It must develop new programs to rescue the economy. It must not take consumer vouchers, tax cuts, cross-Strait direct links, and central bank interest rate cuts for granted. It must act as if these policies are not in place. It must remain pessimistic. In particular, the government must aggressively promote the five year, 500 billion NTD special budget for public works to be adopted this week. It must also increase its administrative efficiency, and undergo intensive reorganization. Spending the money now rather than next year will have an entirely different effect on the economy.

2009.01.12 02:29 am


財政部上周公布,十二月出口只有一百卅六億美元,較前年同月劇減近四成二,創下歷年單月最大減幅;這使得上季出口降幅,由主計處估計的百分之八,大舉擴大 到百分之廿五,意謂上季經濟將比預期的衰退百分之一點七還差。因此,這個數字發出至少三項紅色警報,不只呈現景氣惡化之速、凸顯政府高估上季經濟表現的錯 誤,也預示今年台灣經濟成長率「保二」困難,衰退風險正在升高、衰退期間可能更長。

這已不是政府第一次誤判情勢。上一次是在金融海嘯前的八月,七月出現逆差已見苗頭,但主計處還是樂觀預測下半年能維持百分之三以上的成長,以致面對風暴措 手不及,擴大內需及地方建設等多項對策未能即時接上,執行率也因此偏低;如今再錯,代表之前所有振興經濟方案的依據已經偏差,方案的效果自然也不足以因應 未來的需要,政府的救經濟作為必須加倍、加速,頑強抵抗不景氣的衝擊。

就像中央銀行,在出口數據公布後不到一小時,緊急宣布降息兩碼(零點五個百分點),讓重貼現率降到百分之一點五,距歷史最低只剩半碼,主要目的就是要以低 利率維持弱勢新台幣,防止出口再惡化。但是,利率、匯率都是雙面刃,過低的雙率對台灣經濟是弊大於利,央行加碼降息救經濟的空間已所剩無幾;接下來,就可 能要走到直接印鈔票、塞進民眾口袋的地步,美國聯邦準備理事會(Fed)已在這麼做,但因後遺症大,央行非到萬不得已不會用。

事實上,在貨幣政策幾乎用到盡頭後,各國都在加碼救經濟。像美國候任總統歐巴馬的經濟刺激方案,隨著失業、零售等迭創歷史最差紀錄的數據一一公布,其規模 就從當選之初的二千億美元一路倍增,如今已達一兆美元,連同布希任內國會通過的七千億美元、Fed為市場注入的流動性,美國共投入八點五兆美元拯救經濟, 超過歷次戰爭支出總和,美國顯然已將「經濟衰退」當成頭號敵人。

除了美國,中國大陸已決定動用近六千億美元擴大內需,各地方政府還要加碼;歐元區也通過至少動用區內生產毛額(GDP)百分之一點五、約一千八百億美元的 資源,穩定區內需求;日本、韓國、印度等,也都在不斷上調財政擴張的規模。這一切的舉動顯示,這波經濟下墜之速超乎想像,不管它會否演變成二次大蕭條,各 國顯然是「寧可信其有」,莫不升高對抗力度,寧可多做、絕不少做,即使遲做,也要趕快補做。

然而,出口統計公布後唯一有行動的,還是中央銀行;與貿易業務直接相關的經濟部竟是表示「意外」,拓銷計畫照舊;行政院方面,劉兆玄院長在通過今年經建成 長目標時自勉,強調沒有悲觀的權利,卻還是沒有相應的政策。面對民眾,政府當然不能悲觀;但面對問題,政府卻需要以悲觀為原動力,因為悲觀,才能把問題看 得重一點、想得早一點、準備得多一點、做得深一點,這一點一點的累積,可以縮小政策與執行間的差距,可以避免措手不及,還可以讓台灣更快抓到景氣回春的契 機。

因此,現在政府必須立即研擬新的方案,加碼救經濟;而且,不要把發放消費券、減稅、兩岸大三通、央行降息等政策效益的顯現視為理所當然,而要假設這些政策 未如預期到位時的最悲觀情況;尤其,擴大公共建設條例五年五千億元特別預算本周要通過,政府應集中火力推動,這包括了提高執行效率,並能做密集的配置,同 樣的錢此時花、明年花,對經濟貢獻的效果是截然不同的。

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