In December, Central Bank of the Republic of Governor Perng Fai-nan acknowledged what most people in had known for some time--the economy had slipped into a recession, contracting by 1.02 percent in the third quarter. Media coverage of the downturn had begun long before Perng's announcement, with reports of rising prices for fuel and food in early summer, stocks shedding years of gains in October, export shipments sliding in November and fears over layoffs mushrooming in December.
Lost in the deluge of depressing economic tidings, however, is the fact that is weathering the recession fairly well. For example, at the end of 2008, unemployment in was about 4.6 percent, while it was 6.8 percent in the and 7.8 percent in the Eurozone. Gross domestic product (GDP) growth reached about 1.8 percent in last year, while it registered 1.4 percent in the and 1.1 percent in the Eurozone. Thus, while things could certainly be better in , they could also be much worse.
One of the reasons President Ma Ying-jeou was elected in 2008 was because the public believed he was the candidate most capable of improving 's economy. Now that the worldwide financial climate has worsened, the public is pinning its hopes on the Ma administration's financial competence in another area--that of reducing the recession's impact.
To live up to these expectations, the government has announced a slew of economic stimulus programs. At the beginning of the year, the one generating the most excitement was undoubtedly the government-issued consumer vouchers, which handed the equivalent of NT$3,600 (US$109) to each citizen. However, the major benefit of the vouchers was psychological, as they offered tangible evidence of the government's efforts to ease financial suffering.
If the consumer vouchers can be said to represent the "sizzle" of the administration's efforts, helping businesses operate more efficiently is one of the best ways for the government to follow through with the "steak." The signing of agreements in November 2008 to expand direct air links and shipping services between Taiwan and mainland China will save companies at least NT$4.53 billion (US$137 million) each year, according to Shih Yen-shiang, deputy minister of economic affairs. The Council of Agriculture under the Executive Yuan has also said the shorter shipping time will reduce the damage rate to agricultural products by 10 percent, boosting profits further.
Another important recession-fighting initiative is the administration's NT$500 billion (US$15.15 billion) infrastructure development package. The infrastructure projects will not only lead to upgrades to rapid transit systems, bridges, sewerage systems and railways, but also provide cash injections for the companies doing the work, put money in workers' pockets and stimulate private investment, as many will be implemented under the build-operate-transfer model.
As the government puts the infrastructure plans into action, however, it would do well to heed the advice of economists such as Academia Sinica researcher Wu Chung-shu, who advises the government to use its limited funds in a way that both mitigates the recession and furthers 's long-term development. "This crisis can only be solved by spending public money ... on projects that would be necessary even without a financial crisis," he says.
All recessions eventually end, and, although it is difficult to envision today, at some point the stock market will begin climbing, exports will rise and businesses will hire new employees. The Ma administration is working to ensure that the economy recovers as quickly and painlessly as possible. If the government maintains a steady course in the short term while also keeping an eye on long-term development, will not only weather the recession, but also emerge stronger than before.