Sun, Jun 14, 2009 page8

• EDITORIAL: Fudging the meaning of the numbers

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  The government’s latest foreign trade data show that the trade surplus continued to rise last month — reaching US$3.17 billion from US$2.14 billion in April. The figures were also up US$950 million, or 42.6 percent, from April last year.

  In the first five months of this year, the cumulative trade surplus amounted to US$13.77 billion, according to Ministry of Finance figures released last week. That figure was more than twice the US$6.53 billion surplus registered a year earlier.

  A trade surplus is the difference between a country’s exports and imports when the value of exports is greater. Ordinarily, a large trade surplus is a blessing and helps to maintain confidence in the economy. In terms of the value of GDP, an expanding trade surplus also bodes well.

  But not this time.

  A closer check at the latest trade data reveals that the sizable trade surplus Taiwan registered came about because the decline in the nation’s imports was much larger than that for exports amid the global slowdown.

  Last month, for example, exports fell 31.4 percent year-on-year to US$16.17 billion, while imports posted a 39.1 percent decline to US$13.01 billion. Between January and last month, exports and imports were still much lower than a year ago in the wake of the recession, with exports falling 35.1 percent to US$71.54 billion and imports crashing by 44.3 percent to US$57.77 billion.

  No wonder, then, that citing the surplus has become a convenient ruse among government officials hoping to avoid accountability for subdued export activity. The economy may have bottomed out, but a recovery could be a long time coming because recent indicators of employment, domestic consumption and corporate investment remain dull.

  The latest trade data offer insights into the dimming prospects for corporate investment. According to the ministry’s figures, imports of capital equipment contracted by 44.2 percent year-on-year to US$8.4 billion in the first five months, while imports of agricultural and industrial raw materials shrank by 46.8 percent to US$43.5 billion over the same period.

  This indicates that local firms are still troubled by the sharp downturn in business fundamentals. Most importantly, these firms’ reluctance to invest at this time poses a serious challenge to the nation’s exports in later months if the companies can’t expand capacity rapidly enough to keep up with demand.

  That is to say, Taiwan’s economy will not proceed at full steam as long as corporate investment is so heavily restrained. Other economic data released recently also contain mixed signals, and the public should be cautious about pinning hopes too heavily on other improving economic fundamentals.

  The same applies to the recent euphoria on the local stock market. The government has interpreted this as a signal of improving sentiment among investors, though the market has been driven by rapidly increasing liquidity because investors have been buying up China-related shares rather than sticking to business fundamentals.

  The current task for Taiwan’s economy — to climb back to where it was one or two years ago — promises to be long and onerous. It requires a collective effort to ensure that the recovery is sustainable.

  What this task does not need is political fudging of the meaning behind the numbers.
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