Over 26 million Americans have filed for unemployment benefits during the Covid-19 lockdown, as analysts predict overall jobless rates comparable to the Great Depression. The United States, along with other economic powerhouses, is releasing some of the largest stimulus packages in history to avoid a financial meltdown.
Taiwan’s virus control measures and relative economic stability during this pandemic may leave a vastly different legacy than that of the United States.
The island has so far avoided a nationwide shutdown because of its effective response to the Covid-19 outbreak. This allows more breathing space for government leaders to prepare for an economic slowdown.
Premier Su Tseng-chang announced an expanded stimulus package totaling NT$1.05 trillion (US$34.72 billion) in early April to tackle the economic impact of the pandemic. The package, the equivalent of around 5.5 percent of Taiwan’s GDP, includes low-interest loans and subsidies for industries and individuals most affected by the pandemic.
Compared with other countries in Asia, such as Singapore, Japan, and Malaysia, which have been far more aggressive in pledging economic relief, Taiwan’s measures remain conservative.
Dr. Lien Hsien-ming, director of the Taiwan Study Center at the National Chengchi University, said Taiwan’s economic activities have been maintained at a reasonable level because the country has avoided a lockdown for now. The government is still cautious in planning for economic recovery despite its success in stemming the spread of the coronavirus, he added.
“If the government is pledging more money than necessary now, what more can be done should a full-on lockdown happen in Taiwan?” Dr. Lien said.
The pandemic’s influence on Taiwan’s economy has been uneven. Restaurants and offices have remained open while tourism and transportation sectors have been hit hard by travel restrictions and a global economic hibernation. During the SARS outbreak, arrival numbers dropped by as much as 71.54 percent in the second quarter of 2003, followed by a steady 8-percent growth after the crisis. Taiwan’s tourism industry may require at least eight months for recovery after this pandemic, according to TNL Research based on the SARS data.
Taiwan’s export orders, however, saw a 4.3 percent year-on-year increase in March thanks to the strong manufacturing industries.
While the International Monetary Fund predicted a contraction of 4 percent in Taiwan’s GDP growth, the Taiwanese government and domestic analysts expect a positive growth with a smaller margin, according to Financial Times.
The Taiwanese government passed an additional NT$103 billion subsidies on April 21 for individuals who have urgent financial needs, including tourism and transportation workers, freelancers, and people with disabilities.
“The government is only handing out cash relief for people in need instead of tossing coins around to the rich and poor alike,” Premier Su told reporters at a press conference. “We’re helping industries and individuals to get through the pandemic at a reasonable and effective pace.”
Before the latest subsidy bill passed, the opposition party Kuomintang (KMT) proposed an NT$100 billion budget for direct cash handouts based on individual tax brackets. KMT legislator Chiang Wan-an repeatedly criticized the ruling party’s reluctance to provide timely cash subsidies like the United States.
But Taiwan has yet to reach the stage where stimulus checks are necessary, Dr. Lien suggested. Unlike the U.S., which has a personal saving rate of 7.6 percent, Taiwan’s average household saving rate is around 32.6 percent.
“A lot of Americans live paycheck to paycheck and they really need that stimulus check,” Dr. Lien said, adding that most Taiwanese could still afford daily necessities even if they were out of a job for several months. A one-time payment would not make a major difference when Taiwan’s economy is still largely functioning, he noted.
“We have to prepare for the long-term. If we still don’t have any solutions in June then we could consider cash handouts,” Dr. Lien said. “But for now, we don’t have much to spend on anyway when the public health issue has not been resolved.”
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TNL Editor: Nicholas Haggerty (@thenewslensintl)
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