The service sector has not yet emerged from a slump amid the COVID-19 pandemic, although the rate of decline eased last quarter, the Commerce Research Institute (商業發展研究院) said yesterday.
The coincidental cyclical composite index for the service industry continued to fall last quarter and did not bottom out in October last year as had been expected following the launch of the government’s Quintuple Stimulus Voucher program, the Taipei-based research body said.
The retreat persisted in January, although the leading cyclical composite index has been rising since July 2020, indicating that economic development is uneven, the institute said.
The findings reflect soft domestic demand, which has persisted amid COVID-19 scares, geopolitical conflicts and extreme climate factors that might continue to be a drag on the economy, it said.
The shadow of “stagflation” — a situation of high inflation and unemployment, and slow growth — looms large after Russia invaded Ukraine on Feb. 24, adding to the rise in energy and raw material prices, it said.
While Taiwan had impressive GDP growth last year thanks to strong manufacturing activity and exports, private consumption remained weak, the institute said.
That is because the service industry has been hit hard by pandemic restrictions, it said.
Government bailout and stimulus programs provided short-term relief, but failed to induce industrial transformation or upgrade so service providers could become more resilient and competitive, it said.
Australia, Canada, the EU, Japan and the US have imposed economic sanctions on Russia, putting the world at the most risk of stagflation since the energy crisis of the 1970s, it said.
Taipei should quickly draw up plans to offset lost imports to maintain the supply-demand balance and work closer with the private sector amid a digital transformation, and the move toward environmental, social and corporate governance business models, the institute said.
Overdependence on foreign markets should be reduced to bolster Taiwan’s economic resilience and make it less susceptible to external shocks, it said.
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