The directorate general of Budget, Accounting and statistics recently lowered its forecast for Taiwan’s 2012 economic growth to 2.08 percent.
Some people may think Taiwan is lucky to be able to sustain a growth rate of above 2 percent. But we want to emphasize that numbers are not the point. The real problem with Taiwan’s overall economy is a structural one.
The global economic slowdown definitely has had an impact on Taiwan’s export-dependent economy. The country’s exports declined 4.7 percent in the first half of the year, with its economic growth standing at just 0.11 percent.
During the same period, however, South Korea, Singapore and Hong Kong were able to maintain a positive export growth rate. The economic growth of South Korea and Singapore was 2.6 percent and 1.65 percent, respectively, both higher than Taiwan’s.
Obviously, besides the unfavourable global situation, Taiwan has a fundamental problem related to its industry and the competitiveness of its products.
Technology products have long been the backbone of Taiwan’s export sector. Due to competition from Apple and Samsung, however, Taiwan’s personal computer industry has suffered heavily, while major smart phone maker HTC has seen its market share decline. The DRAM and flat panel industries, meanwhile, have suffered hundreds of billions of Taiwan dollars in losses.
Unless Taiwan adjusts the structure of its industry to cope with the “post-PC era” led by Apple, its economy will not perform well even after the global economy recovers.
On the other hand, Taiwan saw an 8.8 percent decline in its exports to China – Taiwan’s most important export market – in the first half of this year. This shows that Taiwan is losing its advantage in the China market as the mainland continues to strengthen and upgrade the levels of its industry and increase domestic production to substitute for imports. Bearing the brunt are Taiwan’s flat panel and solar power sectors. The situation will become even worse unless Taiwan finds a way out.
Thanks to the increase in the number of Chinese tourists to Taiwan, the tourism industry is one of the few that has grown amid the economic downturn. The government, however, needs to pay attention to and solve the problems that have arisen from the growing number of Chinese tourists in order to ensure sustainable development of the industry.