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What’s Wrong with Taiwan’s Economy? Impact of Globalization 39
cumulated unsolved debt balance at all levels of government
was NT$4.3 trillion in 2007, or about 34.07
percent of GDP. The figure for 2008 is expected to
grow larger. Thus, the debt ratio in Taiwan is considered
to be supportable. 6
As the global financial crisis led to a serious credit
crunch, weak world demand significantly decelerated
the growth of global exports. Economists at the World
Bank predict that world trade will contract by 2.1 percent
in 2009, the first time since 1982 that world trade
will shrink. As a result, a small open economy like
Taiwan started to experience a fall in export orders,
especially in those for ICT products which are sensitive
to the global business cycles. Table 3 shows significant
drops in export orders. They dropped by 28.51 percent
in November 2008. The major destinations of exports
are the United States (23.5%), Europe (22.9%), China
(19.9%), and Japan (13.1%). Major items of export
were information and telecommunication products and
electronic products, the orders for which decreased by
11.52 percent and 27.69 percent, respectively. Apparently,
the drop in the primary export products with the
major trading partners signifies a slowdown in Taiwan’s
total exports.
tion of 2.12 percent in last November. A report from
UBS Investment Research forecasted that Taiwan was
likely to experience a 6.1 percent drop in GDP growth
this year. The Economist Intelligence Unit predicted a
negative growth of -6.5 percent. But one thing is certain.
Weak domestic final demand, coupled with the sluggish
world economy, makes the Taiwan economy stagnant or
even worse than in 2008.
Taiwan’s exports started to decline in August 2008.
(See Figure 4.) As export orders are a leading indicator,
their continuous and significant decline since the last
quarter of 2008 indicates that Taiwan’s exports are
likely to remain at a low level in 2009, as long as the
world recession persists. Forecasts for Taiwan’s economic
growth in 2009 vary widely. On February 18, as
the economy contracted a record 8.36 percent in the
fourth quarter last year from a year earlier the government
revised its estimation a contraction of 2.97 percent,
a remarkable alteration from its previous estima-
6 According to Maastrict Treaty and The Stability of
Growth Packs, the required ratios for foreign debt to
GDP and unsolved debt balance to GDP in European
Union need to be lower than 3% and 60%, respectively.