The pandemic economics of Taiwan

Economics is often about trade-offs. If I increase my prices, I will probably sell less products. If a country wants to stamp out the Coronavirus, it will have to sacrifice its economy. Or, at least, that’s what you might think given that large parts of the world are currently in lockdown to control the virus.

However, then there is Taiwan. They never went into a complete lockdown, their economy was one of the fastest growing economies of 2020 and their total death toll is seven. Yes seven, on a population of more than 23 million people.

It seems they found a magical solution in which they both saved the economy and eliminated the virus. But, of course, it wasn’t magic, it was hard work and smart planning.

In this post, I’ll tell you exactly what they did to eliminate the virus, and how they got their economy to grow a roughly 2% in 2020 the year of the great pandemic.

Initial government response to the pandemic

On the 31st of December 2019, when the news started coming in that a new Coronavirus had emerged in Wuhan, China, the Taiwanese government acted swiftly by monitoring all incoming passengers and especially those from Wuhan and later Italy. While Europeans were still skiing and partying in Northern Italy, the Taiwanese identified all people who had visited any high risk area and forced them plus those with whom they had been in contact to quarantine for 14 days.

This wasn’t done wishy washy, as it was in Europe, where people were naively trusted to always self-isolate. Instead, the government regularly checked in with people in quarantine by phone and in suspicious cases in person.

Furthermore, the government enforced mass masking to limit potential transmission by people who did not have any symptoms but were still spreading the virus. Also, the opening of primary schools and high schools were delayed by two weeks until more was known about possible transmission via children.

Finally, when in March 2020 the Chinese epidemic looked like it was becoming a worldwide pandemic, a ban on large gatherings came into effect. In addition, by mid-March, entry to non-Taiwanese citizens or residents was severely restricted.

Controlling outbreaks

But, even with all of these measures in place, there were still significant outbreaks in Taiwan.

For example, before visiting Japan the infamous Diamond princess cruise ship had docked in Taiwan and its infected passengers had visited several locations on the island. In response, the Taiwanese government swiftly published all of these locations and instructed people who had been in contact with passengers to self-monitor and home-quarantine. Confirmed contacts were also tested immediately.

Another outbreak occurred in March 2020 on a navy ship, where there were 36 confirmed Covid cases. Again, the government acted swiftly by testing all on board passengers and possible contacts on land.

On top of that, all previous measures remained in place: strict border controls, extensive track-and-trace, mass masking, mass testing, and forcing people to home quarantine. Now you might think, my government did all of these things as well in one way or another. But, I think the crucial difference is that the Taiwanese government did all of these right from the start. In other words, they never let the virus get out of control.

Then, in April 2020, the unthinkable happened, Taiwan eliminated the virus on the island and the economy has been churning ever since. In fact, it was reported by the Financial Times to do better than ever thanks to Taiwanese expats coming home to sit out the Covid-19 storm and spend their hard earned cash on the Island.

The Taiwanese economy during the pandemic

So, since there was never a complete lockdown, does that mean there was no impact on the Taiwanese economy at all?

Not entirely, the country did suffer from a lack of tourists, first from China and later from the rest of the world. Also, there was some reduction in activity even if the country never went into a complete lockdown.

That being said, in a year where global trade shrunk by about 10%, Taiwan’s export are up by 5%!! The main reason for this is that, as globally people started to work from home more, demand for electronic devices skyrocketed. And who manufactures these types of devices? Exactly, Taiwan!

Finally, China is by far Taiwan’s biggest export market. And, like Taiwan, China was able to control the virus fairly well, meaning that Taiwan’s biggest export market was not affected too much.

Conclusion

So, Taiwan’s economic Covid-19 miracle was a combination of three crucial factors:

1. The first is that they were cautious in their virus fighting approach,
2. the second is that they worked hard to implement their anti-virus policies,
3. and the third is that they were lucky. Lucky because they were specialised in electronics, and because their biggest export market didn’t suffer as badly as the rest of the world.

That being said, Taiwan has shown us that the economy and health are not a trade-off. It is possible to have both!

So, how did your countries economy do in the year of the great pandemic? And how did the response of you government compare to that of Taiwan? Could they have done better?

Check out this story in video format on YouTube

Originally published at https://www.moneymacro.rocks.