Taiwanese Outlook Positive Despite Pandemic
The COVID-19 situation in Taiwan continues to be severe, with the Central Epidemic Command Center (CECC) reporting between 250-400 new cases per day, as well as a continuing backlog of cases due to the use of PCR testing, and the specter of a Level 4 lockdown looms. Yet the island’s stock market and industries remain strong and upbeat about Taiwan’s economic performance this year.
The TAIEX, the Taiwan Stock Exchange’s largest index, opened Wednesday up more than 30 points at 17,162.38 on a turnover of NT$7.35 billion. This week’s performance follows a total gain of 568.8 points last week.
TSMC stocks rose NT$10 per share last Friday, while steel and shipping and electronics stocks, which include UMC, Winbond, AU Optronics, and Innolux, have also had strong showings.
On May 25, the Taiwan Institute of Economic Research (TIER) announced the results of its latest Economic Trend Survey, noting that its manufacturing composite in April experienced a slight upward correction from the previous month. At the same time, however, the TIER’s service and construction composites decreased.
TIER also points to recent global economic trends. Along with the increase in vaccinations, global economic activity has continued to recover. Manufacturing production and private consumption have gradually begun to pick back up, benefitting Taiwan’s export-oriented economy. On the domestic front, Taiwan manufacturers, buoyed by a rise in international demand, have expressed a positive outlook regarding business prospects over the next six months.
Meanwhile, the rapid increase in domestically transmitted infections in May had a pronounced impact on the business sentiment of the service industry, particularly in food and retail. The general consensus is that losses in this sector will be more severe than last year.
In the construction industry, a major concern involves a decline in house-hunting. Meanwhile, the heightened risk of commodity prices and construction costs rising out of control, the upcoming increase in Taiwan’s capital gains tax on properties, and the severity of the pandemic has reduced the willingness of developers to conduct promotional sales of new properties. A slowdown in the housing market is expected.
Outbreak could slow growth in Q2
On May 27, the National Development Council (NDC) announced that its economic climate index flashed red for the third consecutive month, signaling stable domestic economic growth. It was also the highest level the index had reached in over 30 years.
The NDC had previously expressed a positive economic outlook, expecting similar growth for Q2. However, the rapid rise in local COVID-19 cases in May and the subsequent Level 3 pandemic restrictions have led to the forced temporary closure of restaurants, cinemas, amusement parks, and even KTVs, a staple of Taiwanese entertainment.
Wu Ming-hui, director of the NDC’s Economic Development Department, said that the domestic service sector would be most heavily impacted by the recent outbreak. The CECC’s extension of Level 3 restrictions until mid-June would mostly affect Taiwan’s leisure, exhibition and events, food and beverage, accommodation, and transportation industries, he said.
However, Wu noted that the manufacturing sector continues to experience growth, thanks to the steady recovery of the international economy and increased demand for emerging applications. If the outbreak can be contained, the overall impact to Taiwan’s economy should be limited.
Government introduces new coronavirus relief package 4.0
Citing the increasing severity of the recent COVID-19 outbreak in Taiwan, the Cabinet on May 27 introduced amendments to the pandemic relief bill enacted last year, raising the upper limit of the act’s special budget to NT$630 billion. After receiving the amended bill, the Legislative Yuan increased the budget cap to an even larger NT$840 billion. The new stimulus plan is expected to take effect on June 4 and will end in June of next year.
NDC Minister Kung Ming-hsin noted that under the new plan, individuals will receive a cash stimulus payment of up to NT$30,000, contrasting the NT$3,000 in vouchers included in last year’s relief package.
One-time subsidies will also be available to individuals under the following five categories:
- An additional living allowance of NT$4,500 for low- to middle-income households.
- Emergency grants of NT$10-30,000 for individuals without insurance.
- A NT$30,000 subsidy for self-employed workers.
- A NT$30,000 payment for tour guides and tour bus and taxi drivers.
- NT$10,000 for farmers and fishermen and NT$30,000 for high-level fishermen.
In addition, limits on salary subsidies for companies will be relaxed. Kung noted that under last year’s package, the government offered a 40% wage subsidy for each worker employed by a company whose performance had fallen by 50%, capped at NT$20,000 per employee. However, at the direction of Premier Su Tseng-chang, a direct subsidy of NT$20,000 per person will be offered for May and June.
This edition was translated from the original Chinese by Austin Babb.