Taoyuan Nights

For those of you who don’t know, “GDP” is a number that measures the size of an economy. Bloomberg reports that:

• Taiwan has now already had a record drop in estimated GDP (compared with the last 60 years).
  
• The rate of decline in GDP is getting faster and faster.
  
• The Taiwan stockmarket is still falling – down 46% in 2008, down another few % so far this year.
  
• Biggest decline in retail sales (shopping) … since records began.
  
• Interest rates already close to zero, there is almost no room for further drops.

Consider this. The Taiwanese stimulus plan is a 6% of GDP expenditure. But, we’ve already had a 7% decline in GDP and things are getting worse every month. The way things are going, this will be like putting a ’sticky plaster’ (band-aid) on a neck wound!

Meanwhile, people talk about Taiwan ‘devaluing the NTD’ to make Taiwanese wages more competitive – but every other country in Asia (and everywhere else) already had the same idea! You can’t devalue if everyone else is trying to devalue too. Furthermore, almost everyone else has much more room to devalue their currency than Taiwan…

The good news is the drop in the stockmarket price. At least young people will have a good chance to invest money for later in life, even though house prices are still very overpriced.

We are still near the start of this, in my view. Someone told me today they felt sorry for the students graduating in 6 months. Actually, I think those guys will be OK – the stimulus spending and support for continuing education will give them opportunities. It is the students who graduate in 2 years time that I worry about. I suspect there will not be so much money around to provide them opportunities of any kind, if the economy is still doing poorly. My advice to those students is: work really hard! You had better be good at what you do, by the time you graduate…

Update: later the same day, the GDP numbers were revised downwards again!
The FT is reporting a ‘more than 8%’ drop in GDP so far based on the last 3 month’s news.