SARS Impact

As introduced by the Yearbook of the Republic of China:

With the first case reported in March 2003, worries over severe acute respiratory syndrome (SARS) have hampered international travel and commerce, dealing a serious blow to Taiwan's economy. Although not hit as badly as China in terms of casualty figures (84 deaths in Taiwan and 348 deaths in China), Taiwan suffered economically due to its close connection with China's manufacturing environment. Combined with a generally sluggish global economy, consumer confidence was dampened. Industries hardest hit by this epidemic include airlines, tourism, catering, leisure, transportation, and the retail sector.

In the first quarter of 2003, growth reached 3.5 percent. The domestic economy was severely affected by SARS in the second quarter, however, turning to a negative growth of 0.1 percent. Taiwan's manufacturers are facing delays in orders and shipments, and even cancellation of orders. Taiwanese companies' export orders from Hong Kong rose 9.2 percent, the slowest pace since February 2002, to US$86 million in April 2003. Worries about the impact on Taiwan's businesses pushed the country's main stock index down during the epidemic. Production fell 0.7 percent from a year earlier, marking the first drop since February 2002. Fear of infection caused people to shun public areas such as department stores, shopping malls, restaurants and airports. Consumer and tourist spending were affected as a consequence. Overall, the economic indicators flashed a "blue" light (recession) in April 2003 down from the "yellow-blue" light (economic sluggishness) of the first three months of the same year.

The government has mobilized considerable multi-disciplinary resources to fight against the onslaught of SARS. A cabinet-level SARS taskforce was formed to monitor the epidemic's potential impact, and many anti-SARS precautionary measures were taken, including provision of a US$1.44 billion SARS prevention and relief budget. Furthermore, the proposed Program to Expand Public Infrastructure for Economic Revival and Program of Public Service to Expand Employment also provided US$1.68 billion and US$575 million respectively to help ease the impact of SARS. About 58,000 businesses (some 404,000 individuals) in tourist and passenger transportation industries have benefited from the funding. With the government and people's efforts, the epidemic was brought under control in early June and the economy started to revive. In November 2003, the monitoring indicators flashed the fifth consecutive "green" light of this year. Although the economy contracted by 0.1 percent due to the outbreak of the SARS epidemic in the second quarter, it steadily recovered from the impact, and a growth rate of 3.2 percent is forecasted for 2003. The index of industrial production also rose from a decline of 3.38 percent in May to a growth of 6.4 percent for the whole year. Exports amounted to US$13 billion in October 2003, which was up by 13.98 percent over the same month of the previous year.

The SARS epidemic offered a good opportunity for Taiwan to examine its trade strategies and relationship with China, with business leaders being encouraged to diversify the location of their investments. This is also a good time for Taiwan to promote digitalization, with such ideas as the virtual commercial exhibitions, helping to minimize human contact when an epidemic breaks out.