One thing that baffled me was how Taiwan was able to keep inflation down… The truth is… actually on the whole, it hasn’t! The government has instead been subsidizing things such as energy etc… and when the government won’t be able to subsidize it any more…
The central bank is increasingly worried about this and may adjust its policies after the upcoming election… Either way. Be prepared for even higher interest rate hikes than previously expected.
The article also mentioned that the central bank when faced with economic issues may try to lower the interest rate to stimulate demand driving more inflation.
And someone in the comment section said that Taiwan does not include housing cost appreciation in the calculation as they consider housing an ‘asset’ not sure if this is true
The most upvoted comment on that article raises a real issue. It’s the super rich and the rest on miserable salaries here. There’s been some shrinkflation, it will be biting the majority hard.
It’s true in all countries as far as I know…
However… it just means the cost of purchasing a house (as you are purchasing an asset). Not rent, electricity, gas, water, food etc…
Exactly, and it seems that the rich have benefited off of saving and investing overtime in Taiwan and both the stock market and housing market have benefited off of the back of low wage growth in Taiwan.
But that can only go so far…
Here’s the difference. The Taiwanese goal of subsidizing, as relevant here, was never about hiding inflation or not letting it take place, it’s goal was to smooth the curve and prevent shocks. Which it has. That’s the whole purpose of the central government policy in macroeconomy. Read about counter-cyclical policies if you want more details.
I know all that. However, the problem is that the issues for rising energy prices are more long term than a simple shock and the subsidies have gone on for far longer than expected.
Which subsidies are we talking about? AFAIK Fuel subsidies in Taiwan are strictly for smoothing, and revert to the mean as a matter of law. Meaning that if prices stay elevated for an extended period of time the subsidy will vanish slowly over time.
Taiwan verged on deflation in recent years (except for food). It would be nice to spread an inflation shock over several years and alleviate deflationary pressures.
Taiwan’s subsidised these things forever. This isn’t new.
Exactly but what happens when these subsidies end? (Which they will have to as they can’t last forever)
I predicted the pension cut a few years ago and my in-laws at the time didn’t believe it would ever happen…
They’ve been in place for decades. Nobody wants to be the Buckley’s politician. They’ll likely stay for a while longer.
Even then they’ll slowly ease off the pedal.
I am not in favour for them because F cars and traffic jams.
Was about to say the same.
Just seems the masses are waking up to it more now perhaps?
Sure, it will happen. step by step.
It would be nice if society also stepped back from entitled cash grabs and pure waste. We could alleviate energy constraints by not air conditioning the street. NHI constraints by not wasting medicine, visits etc. Infrasteucture constraints by not buying stuff only to return it within 7days. and so on.
The onus is on Taiwan (us, everyone), not just the government 
Show this to people who believe Taiwan’s inflation figures have been doctored.
In Taiwan the energy bills are not even 2% of total household spending, even for the lowest quintile households it’s barely 3%. The fact that it’s more than 10% in countries like the UK and NL is astounding. For NL it means top quintile household would be spending like €10k on energy alone. Then there’s Estonia…
As long as the government has the budget, it can go on forever. There aren’t very many governments in better fiscal shape than Taiwan.