Taiwan's fiscal deficit to widen on econ-boosting moves
Reuters - 56 minutes ago
By Lee Chyen Yee
HUALIEN, Taiwan, Nov 15 - Taiwan's fiscal deficit will likely exceed 2 percent of gross domestic product this year and next, wider than previously forecast, as the government spends more on infrastructure and plans tax cuts to lift the economy amid a global downturn, an official said.
Taiwan, like economies from China to the United States, announced stimulus plans worth billions of dollars to help its economy weather the worst financial crisis since the Great Depression, but that has sparked worries over its fiscal health.
"Now is not a time to worry too much about deficits because we need to save the economy," Richard Liu, chief of the finance ministry's customs department, told Reuters on Saturday. "We're focusing on a deficit fiscal policy rather than fiscal deficits."
Taiwan's central government budget, which includes the general and special budgets, was forecast to see a deficit of T$236.4 billion , or 1.8 percent of the island's gross domestic product, in 2008, statistics agency data showed.
The budget shortfall was expected to narrow to T$145.3 billion, or 1.1 percent of GDP, in 2009, according to the data last updated in mid-October, though Liu said the forecasts were too conservative.
"The figures hadn't taken into account plans for tax refunds and tax cuts, plus more government spending going into infrastructure projects. Some of these plans will only come into effect in 2009," Liu said.
"I will say we'll easily see our deficit exceeding 2 percent of GDP this year and next."
PROPPING UP ECONOMY
Taiwan's central government has logged fiscal deficits for years and the closest it ever came to balancing its combined general and special budgets in recent years was in 2007, when the shortfall was just 0.1 percent of GDP.
The general budget includes items such as tax collection and regular administrative costs, while the special budget takes into account expenditure in additional infrastructure spending and tax refunds or cuts depending on how the economy fares.
Taiwan, whose economy depends heavily on exports and the global tech cycle for growth, has seen its exports suffer their biggest decline in 3-½ years in October and its jobless rate has hit a three-year high in September, dampening consumer sentiment.
A plunge in the stock market helped push Taiwan's consumer confidence index to a 7-year low in October, data from Taiwan's National Central University showed.
To stave off a sharp economic slowdown, the government said in September it would spend T$122.6 billion on subsidies and tax cuts, including a measure that would halve the tax on stock trading, and an extra T$58.3 billion in infrastructure spending.
The government did not give a timeframe for the plan, though it said spending would begin this year and would benefit the economy through 2009.
Other policies include plans to cut the inheritance tax to 10 percent from 50 percent, provide tax refunds to low-income families and giving shopping vouchers to consumers to encourage spending.
"All this will decrease our revenues and increase our expenditure," Liu said. "We can only hope to improve our fiscal situation when the U.S. economy recovers."
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