The COVID-19 pandemic has disrupted almost every aspect of the world economy, including in Taiwan. As exports account for 70 percent of the nation’s GDP and the tourism industry contributes up to 5 percent, a looming global recession and unprecedented travel restrictions imposed worldwide would inevitably and directly affect many Taiwanese.
Even though the government has been working aggressively to limit financial damage from the outbreak, the scale of economic hardship would only be determined when people are confident that the virus has been contained.
The central bank has revised downward its GDP forecast for the nation this year to 1.92 percent, but some research institutes predict the economy would barely grow 1 percent, given that the nation’s exports would be severely affected by a global recession, shrinking demand and supply disruptions in many countries. Meanwhile, private consumption is likely to diminish significantly as people avoid going out, practice social distancing and cut spending.
Given such unfavorable circumstances, Taiwan’s primary goal now is not attaining growth, but rather slowing the rate of decline, if possible. The government last week unveiled an expanded relief package totaling NT$1.05 trillion (US$34.64 billion) to mitigate the outbreak’s effects on the economy. It consists of NT$700 billion in special loans to industries affected by the pandemic, NT$48 billion in financial aid to companies in the form of wage subsidies and NT$11 billion in consumption vouchers, as well as monthly subsidies for taxi drivers, tour bus drivers, self-employed tour guides and other professionals, minority groups and elderly people, for three months.
The relief package is clearly not intended to stimulate economic growth, but aims to help offset the pandemic’s effects on the economy in the short term, and reduce the financial burden on the most vulnerable businesses and households.
The harsh reality is that business closures and rising unemployment will be back on the radar soon. The government needs to deliver aid to those who need it the most to prevent the situation worsening and restore public confidence once infection rates subside.
The initial phase of the government’s efforts to mitigate the outbreak has focused on containing its spread, through contact investigations, quarantines and increased mask production.
It is equally important in the second phase to help affected businesses and households get back on their feet. Loan assistance saves interest payments and postpones debt payment for only a short period.
However, the problems posed by people having no income and businesses having insufficient cash flow would persist in the next few months if the situation deteriorates, as they would still have to pay rent and wages, and cover other expenses.
In addition to various low-interest loans and relief measures for specific businesses and individuals, the government should also consider cutting certain taxes — such as land value and housing taxes — and exempting banks from liability for bad loans to encourage them to extend credit to those who need it.
The government could also consider temporarily easing some labor regulations — such as limits on overtime, the five-day workweek and the foreign worker quota — to help small and medium-sized enterprises survive this difficult time and speed up production after the outbreak eases.
As long as the government can protect people’s livelihoods and well-being, and keep most businesses afloat, while preventing a spike in unemployment, Taiwan could win the battle against COVID-19.
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