Bloomberg / Taipei
Taiwan President Tsai Ing-wen has overseen rising wages, the lowest unemployment in decades and a surge in investment since she came into office three years ago. But it might not be enough to secure her a second term.
With one year to go in her first term, Tsai can boast a solid economic and financial record. But most opinion polls indicate she could end up being Taiwan’s first one-term president when voters go to the polls in January’s election.
“What the public cares about the most is their salaries,” said Wang Yeh-lih, a political science professor at National Taiwan University in Taipei, adding that as long as people’s disposable income only grows a little, other bright economic signs mean little to the public.
A poll by Taiwan’s Apple Daily published on Wednesday shows Tsai trailing most other presidential hopefuls, including a challenger from within her own Democratic Progressive Party, former Premier Lai Ching-te.
The government has warned that the trade war and US restrictions on Huawei Technology Co will hamper Taiwan’s growth this year. Officials yesterday revised down their forecast for full-year growth to 2.19% from a previous estimate of 2.27%.
While GDP under Tsai has been solid, private investment has been restrained, trailing economic growth in each of the past two years. The outlook may turn positive this year however as Taiwanese companies with facilities in China shift investment back home amid the escalating US-China trade war. Sixty-one companies have agreed to invest NT$310bn ($10bn) in Taiwan so far this year. The government aims to increase those investments to NT$500bn by the end of the year.
Taiwan’s stock market has risen almost 30% over the past three years, outperforming the benchmarks in Shanghai, Tokyo and Seoul. The Taiex index reached the highest since 1990 last January, and has remained above 10,000 points throughout most of Tsai’s tenure, driven largely by an almost 60% gain for Taiwan’s biggest company, Taiwan Semiconductor Manufacturing Co. But data show retail investors are missing out on the gains. Margin debt has declined over the years, a sign that ordinary investors are leaving the market, leaving institutional and foreign investors as the major beneficiaries of the stock market’s gains.
Taiwan’s inflation has remained below 2% for much of the past decade but faster gains for certain key items, such as food, give the public the impression overall prices are rising faster than they are.
“Salaries have risen but not by much,” said Kevin Wang, an economist at Taishin Investment Advisory in Taipei. “At the same time, the low official inflation figure doesn’t really reflect the reality of rising prices of daily necessities because a lot of them, such as food, only make up a small part of the government’s inflation index.”
Even as wages rose 2.6% last year, the biggest jump since 2000, private consumption slowed to 2.1%, the lowest in six years. Economists point to the Tsai administration’s move to cut pensions for government employees as the main reason for the deteriorating sentiment.
“The changes to pensions and labour laws show Tsai’s determination to push through reforms but they angered those who had vested interests before,” said Angela Hsieh, a Singapore-based economist at Barclays Bank. “As for wages, low salaries have been a long-term structural problem for Taiwan. Adding NT$200 or NT$300 to someone’s pay packet doesn’t make much difference unless you can raise people’s salaries by a lot.” The supply of social housing has risen significantly over the past three years after Tsai vowed to provide more affordable housing for young people. The number of new households completed in 2019 is expected to grow about 19% from a year earlier to just over 16,000 units. But that would still leave Tsai behind schedule to build the 200,000 units of social housing she promised to deliver throughout an eight-year tenure should she win re-election.
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