In its latest forecast released last month, the Directorate General of Budget, Accounting and Statistics again lowered Taiwan's projected economic growth for 2012 to 3.38 percent -- the sixth downward revision since last August.
It appears Taiwan is moving farther and farther away from the government's targeted growth rate of 4.3 percent and is at risk of seeing the figure drop below 2 percent.
The inflation rate, on the other hand, is projected to reach 1.94 percent this year as increases in fuel and electricity rates take hold and push up consumer prices.
When economic growth falls below 2 percent and the inflation rate rises above 2 percent, it will mean "high prices, low growth," or stagflation. Such a problem will be quite difficult to handle, because the government cannot ease monetary policy in a big way to boost the economy or tighten monetary policy to curb inflation.
The continuing decline of Taiwan's exports in April was the main cause behind the economic slowdown. Besides international factors such as the eurozone debt crisis and the slow-paced U.S. recovery, the problem is also linked to Taiwan's weak industrial competitiveness and inadequate diversification of products and markets.
The government cannot take the situation lightly and should address it immediately. (Editorial abstract -- May 12, 2012)
(By Y.F. Low)