Wary view of Taiwan private consumption.

As of April 12, 2006, the Republic of China (Taiwan) National Statistics office was still posting a 4.25 percent GDP growth rate forecast for 2006 on its website. The use of the word "still" is meant to imply uncertainty, and this is based on information from a March 22, 2006 China Economic News Service (CENS) (Taipei) story, which details a series of cautions about 2006 private consumption in Taiwan.

When Market: Asia Pacific last looked at Taiwan in a March 2006 "Market Focus" (15:3), the country's credit card debt burden was being strongly felt. And according to the CENS story, the situation has not improved.

Ironically, one of the more optimistic economists quoted in the CENS story says, "It will take about a year for Taiwan's economy to get over this problem."

Among the more serious cautions raised is the prospect that credit card debt will constrict private consumption growth. Private consumption has been expanding in recent years maintaining a growth rate of 6 percent, which in turn added about 3 percentage points to Taiwan's annual GDP increases. Private consumption is approximately 60 percent of GDP overall.

For 2006, however, private consumption is forecast to contribute only 1.7 percentage points to GDP. Citing government statistics sources, CENS said that private consumption would grow only 2.96 percent in 2006. This is the lowest rate of growth in three years. By comparison, in 2004, private consumption grew 3.9 percent.

An idea of the seriousness of the credit card problem can be had from credit card usage data. Credit card consumption in 2005 grew 13.3 percent. This translates to spending of us$44.4-billion, or 20.5 percent of all private consumption. Again citing government statistics, CENS said, "This means that one out of every five dollars of consumption was carried out via credit card." Spending in department stores was accomplished 80 percent via credit card.

Another of the local economists quoted by CENS, though, said that he expected the pace of investment to increase during 2006. This would stimulate private investment-meaning that the burden of credit card debt might not have such a negative impact on the economy.

ADDITIONAL PRIVATIZATION REFORMS WILL ENHANCE PROSPERITY

The population growth rate for Taiwan is lower than the regional average, due in part to a birth rate of 9 per thousand inhabitants, which is below the average of 12 per thousand for East Asia. Job creation has kept up with growth of the labor force in recent years, and it is likely that the situation will improve further in 2006. Unemployment is running about 4.2 percent, and this continues to buoy consumer confidence.

Taiwan's population reached 23-million people mid-2005, which amounted to just under 2 percent of East Asia's 1.5-billion inhabitants. According to data released by the Population Reference Bureau (PRB), Taiwan's population will reach 24-million by 2025. Also, according to that source, Taiwan is going to have a population of 20-million people in 2050.

The PRB revealed that a substantial 78 percent of Taiwan's population lived in urban areas during 2005, and that the country's population density is a high 1,627 people per square mile. The Netherlands is about 11 percent bigger in area than Taiwan, but Taiwan has almost 40 percent more people.

The CIA's World Factbook, indicates that 19 percent of Taiwan's population was birth to 14 years old in 2005, while 71 percent was 15 to 64 years old, and 10 percent of the populace was 65 years of age and over.

CIA statistics revealed that the country's population growth rate will be 0.61 percent in 2006. According to the National Statistics office, Taiwan, in the year 2051, 9 percent of Taiwan's population will be birth to 14 years old, while 55 percent will be aged 15 to 59, and 36 percent of the populace will be 65 years of age and over.