The global economy has got rid of the haze of stagnant growth and begun to rebound this year (2017). In the first half of the year, the economy of developed countries has led recovery and driven real economic momentum in global investment, trade, industrial production and so on. Enterprises and consumers have regained confidence, resulting in active trading in the financial market. Nearly 75% of the world economies are speeding up their growth simultaneously, so that the economic growth is better than previously expected. Next year (2018), with the continuously improving growth in emerging markets and developing countries, the recovery of global economic growth is expected to expand further and the global economy will sustain the growth in the short term.
Thanks to the booming international economy, the growth momentum for Taiwan’s economic indicators of industrial production, monitoring indicators, export orders, and total value of import and export has been able to continue until now and is better than TRI’s prediction earlier in June of this year. Therefore, we modify the estimation of 2017 global economic growth rate to 2.53%. Looking ahead to 2018, the growth of developed countries will be flat and the growth of global trade will slow down. TRI predicts that Taiwan’s economic growth in 2018 will be stable and the economic growth rate of 2018 will be 2.31%.
Regarding private consumption, the amendment of the labor law at the beginning of this year, which gives workers "one fixed, and one flexible day off" per week, has caused negative impacts on domestic prices and job opportunities, and the problem of pension reform has cut back partial private consumption. In the second half of the year, with the end of bearish news on domestic policies, there comes bullish news on the pay increase for all public-sector workers, as well as on the stock market which continues to hit record highs, as a result, private consumption confidence has gradually stabilized. However, the slow income growth and the trend of bi-polarized distribution of income for ordinary people have led to conservative consumption behaviors and resulted in pessimistic trend of general domestic consumption. The estimations for the real private consumption growth in 2017 and 2018 from TRI are 2.14% and 2.07% respectively. For private investment, although the government has actively improved the basic environment which is crucial for the operation of business enterprises, domestic investment still focuses on Hi-Tech electronic industry. The import growth of domestic semiconductor equipment and machine has declined, and the expansion of management scale of conventional industry and small-middle business is limited. In the long term, excess savings and idle fund are still severe problems. Companies are not willing to invest even if they make profits, therefore we must rely on the fund from the Forward-looking Infrastructure Development Program of the government to raise investment. TRI predicts that the real private investment growth of 2017 and 2018 are 0.07% and 2.81% respectively and the real gross fixed capital formation growth will be 3.67%.
In terms of international trade, since the U.S. Department of the Treasury published its reports on the Foreign Exchange Policies of Major Trading Partners of the United States this year, the central banks of major countries reduce their intervention and allow the exchange rates to appreciate, so that export enterprises in general face the problems of exchange rate and weakened price competitiveness. Looking ahead to next year, the U.S. monetary policy is entering an interest rate rising cycle and releasing a new tax reform framework, and is expected to tend to be gentle tightening, which would affect the decisions of central banks worldwide. The pressure of appreciation on NTD is supposed to be eased off, and the import growth is suppressed by the factors of high base period. In general, TRI predicts the growth of real exports of goods and services of 2018 to be 2.72%; the growth of real exports of goods and services to be 3.28%.
In conclusion, the world economy is in cyclical recovery this year and Taiwan's economic growth is positive. It’s the best time to solve the long-time accumulated economic problems. TRI has always strongly urged the government to actively take lead to revitalize domestic investment. In the past year we finally see the government’s determination to resolve the problem of long-term weak investment, not only from the 5+2 Industrial Innovation, the Forward-looking Infrastructure Development Program, and the New Southbound Policy, but also from that the new president of the Executive Yuan has been actively eliminating the investment obstacles faced by enterprises. However, there’re still many uncertainties for Taiwan’s economic growth in 2018, including the direction of global monetary policy, the influence of international hot money flow, the trend and fluctuation of international financial rate, China's economic development and the direction of cross-strait relations, the executive rate of government’s Forward-looking Infrastructure Development Program, and the policy preference of new central bank governor, etc., which would affect the domestic economic performance in 2018 and should still be traced and observed.