Ensure a Five Percent Growth Rate
United Daily News editorial (Taipei, Taiwan, ROC)
August 22, 2011
Summary: President Ma is in the final stages of his current term. His team of advisors must show the same determination they did three years ago, when they safely led Taiwan through the financial tsunami. They must ensure a 5% growth rate at all cost. This is not just about ensuring economic growth rates. It is about ensuring one's political legacy. it is about ensuring confidence, security, and stability. And finally, it is about ensuring a second term.
Full Text below:
Dark clouds menace the presidential election, The DGBAS has just announced its economic forecast for the next two years. The result is a preliminary report card on President Ma's first four-year term. Overall economic growth has been positive according to three criteria, and negative according to one. On the whole, gains have exceeded losses. But the economic growth rate this year was 4.81%, not the hoped for 5%. Next year's estimate is for 4.58%, even worse than this year. President Ma's economic advisors and policies have scored a partial victory. They need to work harder, and achieve more. The January 2012 Presidential Election is five months away. The Ma administration still has time to reach its 5% goal, and add a little extra luster to its report card.
There are many ways to produce a good economic policy report card. One way is to introduce a large number of policies. Another is to amend a large number of regulations. Still another is to complete a large number of public works projects. Politicians usually cite the most favorable indicators. But no matter which indicators they cite, they will only be part of the picture. In the end, one must reevaluate one's larger goal. What is this larger goal? It is the same goal that every government pursues, every waking moment of the day. It is economic growth, price stability, reduced unemployment, higher average incomes, and greater equality.
President Ma and his economic advisors have a good idea where they are headed. For example, real gross domestic product (GDP) may reach 15.6 trillion NT next year, a 19% increase over 13.2 trillion NT figure in 2008. That averages out to about 4.45% a year. The financial tsunami had a huge impact. The economy declined, but commodity prices remained stable despite huge increases in the price of international oil and raw materials. Over four years the increases were kept under 2% a year. The Ma administration's record has been remarkable. The aggregate price index, the pain index, and the unemployment rate, have all fallen over the last two years. But they are still higher than when President Ma took office. Consider national income. This year the gross national product per capita (GNP) will exceed 20,000 USD. Next year it will reach new highs. Incomes have increased. Income distribution, which affects social stability. also improved last year. The gap between the highest and lowest incomes shrank 6.19 times.
But a political record is not graded purely on the basis of policy direction. One has a responsibility to meet one's initial targets. The former represents a policy choice, The latter reflects the level of effort. By this standard President Ma's campaign established a "viable economy" policy blueprint. It included industry deregulation, the normalization of cross-Strait economic and trade relations, and the 12 "I-Taiwan" infrastructure projects. He unquestionably moved Taiwan in the right direction. But the government still has a long way to go before it achieves its "6:3:3" goals, These include a 6% average annual economic growth rate, a 3% unemployment rate, and a 30,000 USD per capita GNP after eight years in office. The Ma administration's efforts are inadequate. The public knows that the administration is not to blame for the European and US financial crisis. But the Ma administration cannot use this as an excuse to rest on its laurels.
The global economy is in chaos. The US economy risks going into recession. The European sovereign debt crisis is entering a new wave of turmoil. The Chinese mainland is feeling the after-effects of gradually tightening monetary policy. Japan is undergoing reconstruction following the Fukushima nuclear plant disaster, and coping with the strong Japanese yen. Nouriel Roubini, aka Dr. Doom, predicted a perfect storm by 2013. That storm seems to be gathering even now. Over 60% of Taiwan's trade is with these four economies. Harsh challenges threaten from without. In the short term, the government most needs to guard against international stock market collapse, and the ripple effect on the Taiwan stock market. Superficially it is concerned about the stock price index. But in essence, its real concern is financial system liquidity and stability. The real economy must not be dragged down by the financial crisis.
The domestic situation is hardly optimistic. Private sector consumer confidence has been undermined by the global stock market crash. Over the past two years, the only factor that has maintained momentum in private consumption has been Mainland tourism to Taiwan. During the first half this declined. The second half shows no signs of improvement. People have already scaled back investments due to the vagaries of the international economy. Public construction projects are nearing completion. ECFA, which exerted an impact for almost a full year, has not inspired much desire to invest in Taiwan. Domestic demand has cooled, making the already slow pace of recovery even slower. If events continue to develop the way they have, they will further weaken consumption and investor confidence, creating a vicious circle. Confidence is defined as expectation of future economic growth. It manifests in the moment, Strong confidence in the economy has a multiplier effect. Therefore, the government must not overlook the warning signs of weakening domestic demand. It must increase domestic demand to increase confidence. This is the government's top economic policy priority.
President Ma is in the final stages of his current term. His team of advisors must show the same determination they did three years ago, when they safely led Taiwan through the financial tsunami. They must ensure a 5% growth rate at all cost. This is not just about ensuring economic growth rates. It is about ensuring one's political legacy. it is about ensuring confidence, security, and stability. And finally, it is about ensuring a second term.
保五 保政績 保信心 保穩定