the westminster news
Published by the students of Westminster School
By Grace Yuan ’23
(Image Credit: The Economist Intelligence Unit.gif)
The onset of the COVID-19 pandemic led to adverse global economic impacts (Huang et al. 2020). The outbreak greatly decreased the global demand for goods and affected supply chains, transportation, international trade, and tourism. How Taiwan dealt with the economic impact of COVID-19 is particularly striking. Taiwan primarily relies on tourism and manufacturing industries for its economy. Initial predictions classified the country as high-risk due to its geographic proximity to the pandemic’s epicenter, alluding to a high likelihood of economic instability. Yet, Taiwan’s economy has been resilient despite the economic constraints.
The increased demand for long-distance communication invigorated Taiwan’s manufacturing sector. Electronics comprise at least half of Taiwan’s annual exports. Remarkably, the country’s finance ministry reported a 24% increase in electronics exports, despite the overall revenue decline by 3.8% in the first quarter (Wang and Ellis, 2020). Such increments mitigated the declining revenue in the country’s tourism and travel sectors. These arguments point out that Taiwan’s diversified economy took advantage of the global demand for communication technology; hence increased national revenue.
Despite the success in the technology sectors, the country’s tourism and aviation sectors accumulated significant losses due to lockdown procedures. However, government stimulus packages for local businesses saw the stabilization of these industries despite extremely low numbers of domestic traveling and declining tourism sector. Interestingly, restricted movements resulted in an increased demand for conducting business and education online; thus a rise in demand for 5G communication and electronic technology, leading to increased revenue (Wang and Ellis, 2020). Furthermore, the rise in demand for electronic communication technology mitigated the declining revenue from the tourism sector, causing a rise in Annual GDP despite adverse outcomes for other Asian countries.
Additionally, global domestic businesses incurred significant losses due to a change in consumption patterns and movement restrictions as a result of the implementation of lockdown measures. Taiwan’s ability to control the spread of the virus resulted in unrestricted domestic movement, maintaining the pre-pandemic levels of the supply and demand for the local commercial activities. Additionally, economic stability generated minimal impact on employment rates, leading to insignificant changes in consumer purchase patterns; hence a boost for local businesses. According to Huang et al. (2020) unemployment rates directly impact a nation’s economy. With disruptions in international trade, maintaining local economic stability contributed to the resilience of Taiwan’s annual GDP.
Taiwan’s strategic ties to China and the US contributed to its revenue increase, especially with the deteriorating politico-economic ties in 2020 due to COVID-19. Zhang and Savage (2020) attribute Taiwan’s increased domestic investments and the rise in demand for its manufacturing products to the competitive ties between the two economic giants. US-China political and trade relations led to an increase in demand for Taiwan’s electronics. For instance, Apple relies on Taiwan’s innovative technology for its electronic devices, since the US government implemented restrictions on China’s Huawei. Also, the onset of the 2018 trade conflict saw numerous Taiwanese manufacturers move their productions from China to home in order to escape the intense sanctions. All in all, the outbreak further stabilized Taiwan’s position as a key player in the communications industry globally.
Taiwan’s successful control of the spread of COVID-19 greatly reduced the effects of the pandemic on its economy. Taiwan’s economic resilience also derived from the trade conflict dynamics between the US and China, which saw increased domestic investments, and a rise in communication technology exports. Overall, the country’s resilience during the pandemic mainly from its ability to maintain international and domestic trade practices despite the high risk geographical and politico-economic global state. Taiwan can utilize its success to establish a leading role in global supply chains, especially in its manufacturing sectors. Given the success of Taiwan’s policy to recover its economy, other countries should take Taiwan as an example to ameliorate their situations.
Huang, C., Hsu, C., Chiou, M., and Chen, C. (2020). The main factors affecting Taiwan’s economic growth rate via dynamic grey relational analysis. PLoS ONE, 15(10): e0240065. https://doi.org/10.1371/journal.pone.0240065
Wang, C. and Ellis, S. (30 April 2020). Taiwan dodges the worst economic impacts of coronavirus. Bloomberg; Economics. https://www.bloomberg.com/news/articles/2020-04-30/taiwan-dodges-worst-economic-impacts-of-virus-and-keeps-growing
Zhang, J.J. and Savage, V.R. (2020). The geopolitical ramifications of COVID-19: The Taiwanese exception. Eurasian Geography and Economics, 61 (4-5), 464-481. https://doi.org/10.1080/15387216.2020.1779773