Taiwan headed for debt trouble

The Budget Directorate reports that Taiwan is sitting on a massive debt bomb, facing a double whammy of declining tax revenues and rising debt.

The Directorate-General of Budget, Accounting and Statistics forecast yesterday that by the end of this year, public debt will reach NT$3.7 trillion. In addition, it noted that the average public debt-GNP ratio for the past three years has been 35.9 percent.

.....

...debt levels have consistently neared the legal limit, which implies that the deficit is too large, Shu said

Apart from the problems of rising debt and expanding deficits, Shu also noted that lower tax revenues also posed a serious financial problem.

According to DGBAS statistics, Taiwan's ratio of tax revenue to GNP is just 12.9 percent, lower than the average ratio of 27 percent for industrialized countries.

Taiwan's public finances are a mess -- the article does not make clear whether the NT$3.7 trillion figure includes the frozen provincial government's debt, which now appears to have been swept under the rug. It would be interesting to see just how much of Taiwan's "growth" in recent years has been financed by these Reaganesque deficits. It must certainly be a large share, with industry shifting over to China, and many people being forced into lower-paying service jobs.

[Taiwan]