Taiwan to propose economic measures to kindle fragile growth

PUBLISHED : Friday, 05 August, 2016, 2:02am
UPDATED : Friday, 05 August, 2016, 2:02am

Taiwan’s cabinet will formally propose measures to strengthen the island’s improving economic prospects after President Tsai Ing-wen said relying on traditional monetary and fiscal policies would not be enough to resolve structural issues.

Premier Lin Chuan may unveil a package of measures before August 12, the Liberty Times reported. Cabinet spokesman Tung Chen-yuan declined to discuss the policies before an official ­announcement. 

With demand for its exported goods in decline for nearly 18 months, Taiwan is looking for ways to expand trade relationships and boost public and private investment. Gross domestic product expanded 0.69 per cent in the second quarter after the longest period of contraction since the global financial crisis.

Tsai, who took office in May, said her administration would spend in an effort to pull excessively high levels of private savings into investments. The National Development Council last week established a NT$100 billion (HK$24.47 billion) fund that will invest in businesses seeking to acquire new technologies and in innovative new companies.

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Lin is also planning to allocate a bigger budget of about NT$200 billion to infrastructure projects next year, TVBS television reported this week. The cabinet said it would submit its budget proposal for 2017 to the legislature by the end of this month.

Lin’s proposed package would follow Japanese Prime Minister Shinzo Abe’s plan to spend 6.2 trillion yen (HK$4.68 trillion) on tourism-boosting infrastructure – including the construction of a magnetic levitation line – and on building projects overseas.

In addition to how much more money the government will spend, it’s also key to watch how they will spend the money
Barclays economist Angela Hsieh

In its own bid for more tourism, Taiwan waived visa requirements for citizens of Thailand and Brunei this year, dovetailing with Tsai’s plan to focus on increasing trade and commercial ties with Southeast Asia. The president also previously outlined a goal of turning Taiwan into “Asia’s Silicon Valley” by amending corporate law, capital raising rules and immigration policy to attract would-be start-ups and foreign professionals to the island.

Taiwan’s policy interest rate is already near an all-time low after four decreases since the third quarter of last year, prompting the central bank in June to warn against any government spending cuts in 2017.

The economy “needs more fiscal expansion measures particularly now in a down cycle,” Barclays economist Angela Hsieh said.

“In addition to how much more money the government will spend, it’s also key to watch how they will spend the money.”