In November last year, The Economist published an article arguing that Taiwan's central bank was inducing currency weakness to support semiconductor exports, thereby causing what it called "Taiwan disease." Although Taiwan's economy appears to be enjoying an unprecedented boom, the magazine criticized it as distorted growth centered on semiconductor exports. As a result, ordinary citizens are bearing the burden of weak domestic demand and income polarization, the article argued.
Local media in Taiwan have also frequently reported that the island's economy is suffering from "Dutch disease." The term originates from the Netherlands, where natural gas exports surged after the discovery of the North Sea gas field in 1959, driving up prices and wages while neglecting competitiveness in other industries, eventually causing the national economy to backslide. The term is now also used when a country or company becomes overly dependent on a specific industry or product, leading to a decline in long-term growth capacity.
Taiwan's economic growth rate this year is expected to remain in the 8 percent range for a second consecutive year, driven by semiconductor exports and increased capital investment. Last year, per capita gross national income (GNI) reached $40,585, up 14.2 percent from the previous year, surpassing South Korea. The stock index has been hitting record highs. But concerns about "K-shaped growth" are also significant. Only a few industries, such as information technology (IT) and pharmaceuticals, are showing growth, while most traditional industries — including machinery and equipment, metals, and apparel — are struggling. The average annual salary in the semiconductor industry reaches $42,000, but the average across all sectors is just $24,000. As income gaps widen, some young people are taking on debt to plunge into the stock market.
Korea's economy posted a surprise 1.7 percent growth in the first quarter of this year, but excluding semiconductors, growth was only about half that level. The share of semiconductors in total exports nearly doubled from 20.1 percent in April last year to 37.1 percent in April this year. The decline of existing key industries, income polarization, and a weak won are not much different from Taiwan's situation. Moreover, if the semiconductor boom prompts the Bank of Korea to move up its rate hike timing, the interest rate burden on vulnerable groups will increase. In many ways, "Taiwan disease" is not someone else's problem.
