Benefiting from factors such as booming exports, the General Accounting Office predicts that Taiwan’s economic growth rate is expected to reach 4.42% in 2022, which brings good news, but another data reveals a warning sign that excess savings continue to climb to NT$3.58 trillion, A record high means that the flood of idle funds is more serious, which may lead to economic imbalances.
The difference between the gross national savings and the gross domestic investment is the “excess savings” of the current year, which can reflect the status of idle funds; the higher the number of excess savings, the more serious the idle domestic funds. Observe the changes in Taiwan’s excess savings. In 2014, it broke the 2 trillion yuan mark for the first time, and then continued to climb. In 2020, it broke the 3 trillion yuan mark once more. In the past two years, the world has been in an extremely loose monetary environment due to the epidemic, and funds have flooded. Water, excess savings continue to hit new highs, forecast to reach 3.58 trillion this year.
Xu Jiadong, a former vice-president of the central bank and now a chair professor at Soochow University, said that in recent years, Taiwanese businessmen have brought back large sums of money, driving relevant economic data to perform well. Part of it goes to real estate. “We can’t help encouraging Taiwanese businessmen to come back, but is Taiwan better now?”
Cai Yutai, director of the General Statistics Division of the General Accounting Office, explained that the issue of excess savings has been discussed for many years, and some scholars are worried that too much funds may lead to economic imbalances. However, he believes that the rapid increase in excess savings in recent years is due to the special factors of the epidemic. He explained that excess savings is roughly equivalent to the current account surplus. In 2022, the excess savings will be 3.58 trillion yuan, of which 90% will come from the current account surplus, which is caused by booming exports.
The excess savings is the difference between savings and investment. We further observe that the savings rate this year is 42.02%, which is indeed the second highest in history, second only to last year’s 42.22%, but the investment rate is 27.03%, which is also a new high in the past 22 years. Cai Yutai pointed out that the investment momentum has not weakened, or even increased significantly. It is only the epidemic and border control that limit the consumption momentum of the people, which will lead to a significant increase in the level of excess savings.
Qiu Junrong, a professor at the Department of Economics at Central University, also agrees that the epidemic is indeed one of the factors for the surge in excess savings. In addition to the looser monetary environment, the return of funds following the US-China trade war has also flooded the market with funds; although real investment has eliminated some funds, But at the same time, it is also held in various forms such as real estate, the stock market, cryptocurrencies, etc. “Everything (price) is increasing.” To solve the problem of excessive idle funds, in addition to guiding the flow of funds to physical investment, monetary policy is also an important tool, especially at the current stage where raw materials and construction costs are soaring.
The U.S. Federal Reserve started a cycle of interest rate hikes in March, and Taiwan’s central bank rarely raised interest rates on the same day by one yardage, announcing that monetary policy was heading for tightening. , but following taking the first step, how to continue to recover funds from the market is more critical. Qiu Junrong said bluntly that the central bank must take seriously the problem of excess savings reflecting the current excess supply of money in Taiwan. After all, Taiwan has been in an environment of extremely low interest rates for a long time, which has caused distortions in resource allocation. Many costs that must be reflected cannot be reflected, and long-term drawbacks will inevitably remain. ; Subsequent rate hikes by the central bank will not only allow the economic system to reflect a reasonable cost of capital, but also the path that must be taken to optimize the economy.
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