Last week’s massive earthquake appears to only have had a minor impact on Taiwan’s economy, as commercial activity was largely unaffected and major tech firms resumed normal operations after a brief pause, Moody’s said yesterday.
“It looks like the economic impact will be minimal,” Moody’s Analytics chief Asia-Pacific economist Steve Cochrane said in a report.
The magnitude 7.2 (ML) quake struck 18km south-southeast of Hualien City, which is known more as a center of tourism rather than a center of business or commerce, he said.
Photo: Sam Yeh, AFP
If the epicenter had been in Taipei or on the west coast, where much of the semiconductor industry is based, the impact would have been much more serious, he said.
Chip fabs were reported to have been closed for half a day or the entire day, but barring the discovery of damage to manufacturing equipment, production delays would be minimal, he said.
Last week, the National Science and Technology Council said that most chip and flat-panel manufacturing facilities had resumed normal operations the day of the quake after a brief pause, and only a few were making final adjustments before returning to full operations.
The construction industry would likely receive a boost over the next few quarters after insurance payments are made and reconstruction begins, Moody’s said.
The boost would be limited mainly to areas on the east coast where infrastructure and building damage was the greatest, it said.
Meanwhile, Moody’s Analytics senior director of supply chain strategy John Donigian said in the report that the earthquake highlighted the importance of supply chain diversification.
“Concentration risk with suppliers is never an issue until an event like the quake happens,” Donigian said. “Diversifying suppliers from a geographic standpoint allows supply chains to be more resilient in these situations.”
The incident also lent support to the practice of integrating climate data into supply chain risk management to build up resilience, as such an approach enables companies to proactively assess and mitigate risks associated with natural disasters, ensure continuity and limit vulnerabilities in their supply chains, he said.
Kelvin Kwok (郭嘉銘), an analyst of Asian financial institutions at Moody’s Ratings, said the quake’s impact on the earnings and capitalization of Taiwan’s property and casualty insurers should be manageable.
The assessment reflects insurers’ strong reinsurance protection against earthquake risks, which would contain their retained losses, Kwok said.
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