Taiwan's 2020 savings rate forecast to hit 32-year high amid COVID-19

Taipei, July 5 (CNA) Taiwan's national savings rate is estimated to reach 35.79 percent in 2020, the highest in 32 years, as the COVID-19 pandemic has changed people's domestic consumption habits, the Directorate General of Budget, Accounting and Statistics (DGBAS) said Sunday.

Due to the impact of COVID-19 on businesses and people's income, they are spending less, the DGBAS said, noting that a country's national savings is the percentage of gross domestic product that households, companies and the government save rather than spend.

Taiwan's national savings rate this year, therefore, is expected to reach 35.79 percent, 1.44 percentage points up from 2019 and the highest since 1988, the DGBAS forecast.

In addition, the country's excess savings -- the difference between its gross domestic savings and gross domestic investments -- will climb to around NT$2.4 trillion (US$81.38 billion) this year, the DGBAS predicted.

That will translate into an excess savings rate -- the ratio of savings to gross national income-- of 12.35 percent, exceeding 10 percent for the eighth consecutive year, according to the DGBAS.

With its national savings rate poised to hit a fresh high since 1988, Taiwan is likely to see inadequate growth in investment and consumption this year, the DGBAS said.

While an aging population and a low birth rate in Taiwan have been adversely affecting consumption growth, the COVID-19 outbreak that started in January has also affected household consumption and business investments, the DGBAS said.

Kamhon Kan (簡錦漢), head of the Institute of Economics at Academia Sinica, said DGBAS data shows that Taiwan's economy is awash in idle funds that are not being invested, which could lead to economic stagnation.

He said it would be a good strategy to direct those idle funds into substantial investment to help rev up domestic economic growth.

Taiwan should restructure its export-oriented economy and try to boost domestic demand to ride out the uncertainty in the volatile global economy, Kan suggested.