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Editorial: Accounting
for economic priorities
Once again, the Directorate-General of Budget, Accounting and Statistics (DGBAS)
has revised its economic growth forecast for this year and next year. The good
news is that the statistics agency has this time adjusted its GDP growth
forecasts upward for the first time in about 14 months. The bad news is that
domestic recovery is not particularly strong, and the employment outlook and
private consumption remain weak.
On Friday, the DGBAS said it now expected the economy to expand 1.13 percent for
the whole of this year, which was higher than the 1.05 percent growth it
forecast on Oct. 31. Prior to the latest update, the agency had lowered its
growth forecast nine consecutive times since August last year, when it estimated
the economy would expand 4.58 percent this year.
The government¡¦s latest statistics confirmed that economic activity bottomed out
in the September quarter, growing 0.98 percent year-on-year, while GDP is
expected to show an annual increase of 2.97 percent this quarter. For next year,
the DGBAS also raised its economic growth forecast to 3.15 percent from the 3.09
percent estimate it made late last month.
If achievable, the new GDP growth forecasts are certainly good news, but this is
just one way to read the government¡¦s latest data.
Export order data released by the Ministry of Economic Affairs (MOEA) on Tuesday
showed that demand over the next one to three months increased for two
consecutive months last month, rising 3.2 percent year-on-year to US$38.38
billion, the second-highest level on record. While this supports the DGBAS¡¦ view
that the nation¡¦s economic momentum will pick up this quarter, the question is
whether the economy can sustain growth solely on recovering external demand.
This is especially true because the public often ignores government data about
GDP and exports, focusing instead on job security and disposable income. People
are unlikely to go on a shopping spree based on an upward revision in GDP
outlook.
Public confidence in the nation¡¦s economic outlook might also be stronger if not
for other data that suggest signs of weakness in other parts of the economy.
In the face of high unemployment and stagnant salaries, private consumption may
only edge up 0.14 percent this quarter, the lowest rate since the second quarter
of 2009, and may increase only 1.13 percent for the whole of this year, before
hitting 1.45 percent growth next year, based on government forecasts.
Consequently, local companies are expected to face a difficult time in capturing
consumers¡¦ dollars.
Additionally, the latest domestic trade data, released by the MOEA on Friday,
showed the combined revenue of the retail, wholesale and restaurant sectors
declined last month for the fifth month in a row to NT$1.22 trillion (US$41
billion), and, most importantly, the MOEA said it did not expect the situation
to show a significant improvement this quarter, nor during next year.
The less-optimistic prospects in private consumption and domestic trade reflect
the fact that consumers are still downbeat about the labor market. Indeed, the
latest unemployment figure, released on Thursday, caught many people by
surprise, because not only did the rate rise for a second consecutive month to
4.33 percent last month, but it also marked the fourth time in 10 years that
October¡¦s rate was higher than September¡¦s.
The government must realize that having GDP forecasts revised upward is one
thing, but allowing more people to land decent jobs and afford to spend more is
quite another.
Last week¡¦s data imply that the economy is still struggling and the domestic
labor market remains challenging, with more workers either taking involuntary
furloughs or receiving pink slips.
It is a valid policy for the government to pursue trade deals with other
countries to boost the economy, but it ought to be alert to what threatens
public support from within, as employment and consumption power trump all other
economic considerations.
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