Assessing the Covid-19 economic impact
The ECCT hosted a Special Lunch examining the impact of the coronavirus pandemic on Taiwan’s economy. Read the full event report here
The event featured guest speakers Dr Roy C Lee, Deputy Executive Director, Taiwan WTO & RTA Centre from the Chung-Hua Institution for Economic Research (CIER) and Dr Chen Shin-hui, Assistant Research Fellow at CIER, who is responsible for compiling Taiwan’s monthly purchasing managers’ index (PMI).
In his presentation Dr Roy Lee gave his analysis of both the short and long-term economic implications of the coronavirus pandemic.
In his conclusion, Lee acknowledged that Taiwan has benefited from the US-China conflict but that the supply network re-configuration and re-shoring are creating uncertainties for Taiwan. This is because Taiwan’s manufacturers have hitherto operated in clusters, which are expensive and complicated to relocate. Moreover, there are not always obvious alternative locations to China.
He added that acceleration of new technologies and digital transformation is vital while regional integration is more important than before for Taiwan in order to offset the cost of re-shoring and increasing self-sufficiency.
He concluded with the caveat that no one has a crystal ball as to how things will end up and therefore any forecasts and predictions made are only speculative and everyone will have to keep observing, learning and making adjustments as they go.
In her presentation, Dr Chen Shin-hui gave an assessment of the impact of the pandemic on Taiwan’s industries based on evidence from the Taiwan Purchasing Managers’ Index (PMI).
She made the point at the outset that there are no reliable models to estimate the impact of a pandemic like the current one. Many estimates may actually be too optimistic.
She made the point that official data is a lagging indicator since it only reports previous economic activity, usually on a monthly basis. Moreover, some models have not been adjusted to take into account factors such as the lockdown, port congestion and changes in human behaviours or business models. For this reason, it is more important for businesses to look at trends in leading indicators than GDP numbers.
Looking ahead, Chen noted that there are uncertainties, challenges and opportunities. The ongoing lockdown, falling demand, store closures and limited warehousing operations are forcing some shippers to leave their cargo uncollected at ports, raising concerns that supply chains could break down if ports become too congested. There is also a risk that high unemployment will turn from a short-term shock into a longer slump. In addition, trade and investment tensions remain high and could spread further and the pandemic has resulted in serious fluctuations in financial markets and cash flow problems for many businesses.