With the government yesterday relaxing restrictions on gatherings and easing mask rules, local hotels, travel agencies and retailers are counting on a post-COVID-19 shopping spree after months of low consumer activity.
In addition to the NT$50 billion (US$1.68 billion) of Triple Stimulus Vouchers to be issued, the government unveiled a subsidy program worth NT$3.9 billion aimed at increasing tourism spending to NT$23.5 billion. Independent and tour group travelers from next month would be eligible for subsidies for hotel rooms on Taiwan proper, as well as on outlying islands.
Last month, hotel bookings soared 50 percent from the same period last year, while tour bookings rose to their highest this year as hotels and travel agencies have been offering deep discounts during the pandemic, statistics from online travel agency ezTravel showed.
As international travel is limited, group bookings to Penghu increased 60 percent year-on-year, said Lion Travel Service Co, the nation’s largest travel agency.
The strong growth in domestic travel bookings reflects a craving for outdoor activities and social life after a period during which the government had urged people to remain at home, which has helped Taiwan contain the virus’ spread.
The question is whether a reactionary spending boom will materialize and whether the pent-up demand will be strong enough to drive the nation’s economy back to pre-pandemic levels.
Some economists have warned that a spending binge might be short-lived, as the pandemic might have prompted profound changes to spending habits. The health crisis has heightened risk control among consumers, meaning that they tend to avoid spending on nonessential goods and save more, behavior that might continue even after the pandemic ends.
After a brief period of increased shopping, traveling and dining out, people might tend to become conservative over big-ticket spending as the pandemic’s effect on the global economy, and escalating trade tensions between China and the US, upend supply chains.
Moreover, the unemployment rate and the number of people on unpaid leave are soaring. As of May 31, about 28,345 people had their working hours cut, up 7.68 percent from a month earlier, Ministry of Labor data showed. The increase was mainly due to Pou Chen Corp — the world’s biggest manufacturer of sports shoes — cutting pay and furloughing employees as major customers cut orders.
The unemployment rate in April climbed to 4.03 percent, surpassing 4 percent for the first time in 42 months.
Without deep pockets, people are unlikely to splurge on unnecessary items, so consumption should recover steadily this year, rather than boom amid reactionary spending.
Taiwan’s economy is staggering, as domestic consumption is not sufficient to prop up growth, while external demand for a wide range of goods, smartphones in particular, is dwindling as developed countries battle to revive consumer confidence. Taiwan’s GDP is forecast to grow just 1.67 percent this year, rather than 2.37 percent as previously estimated.
As the subsidies for consumers pale in comparison with an estimated NT$20 trillion in GDP this year, government spending and/or public infrastructure construction should be increased to counter the fallout from the COVID-19 pandemic.
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