Country risk: Taiwan stands out with its coronavirus resilience


Jeremy Weltman
Published on:

The island seems to offer some ‘investor immunity’; the questions are why and whether all experts agree.

Taiwan face mask_780
The success of Taiwan's proactive stance over coronavirus leaves it standing ahead of the rest


Euromoney’s latest country risk survey saw the majority of countries downgraded as the world went into lockdown to limit the spread of coronavirus.

But not all countries were equally affected, with Taiwan proving one of the major exceptions. The world’s 16th safest investor domain was upgraded, and quite significantly so.

In fact, it is one of only two countries among the top 20 on Euromoney’s global risk rankings to see its risk score rise (where a higher score implies lower risk).

The other is Malta, albeit less significantly, while Iceland (21st), Portugal (26th), Israel (27th), Estonia (28th) and Poland (30th) are other lower-risk countries resisting the generalized downgrading of scores evinced for most of the developed world, to a limited extent. 

Why Taiwan?

It might seem illogical to expect any improvement, with world trade depressed and the largest, systemically important countries – China, the United States and core European nations – all grappling simultaneously with the biggest crisis in living memory.

Yet a closer look at Taiwan’s risk metrics reveals it has strengths – not least in comparison with Hong Kong, where the political risks for one thing are higher, eroding the territory’s risk advantage:


Taiwan was well prepared going into the crisis, with solid macro-fiscal dynamics, economic growth, minimal inflation, low unemployment, and strong budget and external balances.

Which is why it has been a consistently strong performer in the survey for many years, similar to Singapore, with a positive ten-year risk score trend underpinned by the stability of its banks, currency and political system.

But that’s not all.

The government’s early intervention to combat the spread of the coronavirus has proved highly successful, limiting the number of cases to less than 500, with a remarkably low death toll of six, as of April 29.

The positive impact of closing its border to China and imposing early quarantine measures and contact tracing is not only preventing the loss of life, but also protecting the economy, and notably key services, by avoiding lockdown.

Unlike the US, the UK and other European countries, the services sector is functioning normally despite the absence of foreign visitors, supporting profitability and limiting the negative effects on public finances.

This has made local Taiwanese forecasters relatively more optimistic about GDP prospects, with only a slowdown in growth expected this year, to around 1% to 2%, rather than the deep recessions foreseen for other countries.

If a downturn does prove unavoidable, it should be less severe.

Benefiting at China’s expense

Szu-Min Chien, an associate research fellow at the Taiwan Institute of Economic Research, is one of Euromoney’s survey contributors who notes the additional benefit to Taiwan of the US-China trade war, which encouraged manufacturers to move their supply chains out of China before the pandemic struck.

“The Taiwanese government put much effort into helping these industries back to Taiwan, supporting them to find land, capital funding and labour,” she says.

This is also a major plus factor for survey contributor I-Lin Cheng, who is deputy executive director for the Green Energy Industry Promotion Centre in the Ministry of Economics in Taiwan.

“Punitive tariffs on Chinese-made products urged lots of Taiwanese companies to transfer or expand production lines in Taiwan from China to make goods for the US market,” he says.

Besides the returning investment, the industry and energy transition has boosted local investment and therefore domestic demand and economic growth, diminishing the shock from the global market. 
 - I-Lin Cheng

“In the past 25 years, Taiwan's exports have relied on a triangular trade system between Taiwan, China and the US, permanently rebuilding the supply chain system and industry hub of the world.

“Besides the returning investment, the industry and energy transition has boosted local investment and therefore domestic demand and economic growth, diminishing the shock from the global market.”

As for the improvement to Taiwan’s political risk – after the presidential election produced a landslide victory in January for the incumbent Tsai Ing-wen, it gave her confidence to implement reforms.

Quick action

Chien notes the very quick action taken by the government to prevent human transmission of the coronavirus.

“Our government built up a Central Epidemic Command Center composed of experts to make all essential and transparent policies based on the ongoing situation, such as to do with temperature checks, mandatory quarantines, border control, encouraging handwashing with soap, social distancing, wearing face masks, and many other guidelines for daily life.

“The actions were a great achievement. There have been no new confirmed cases for several days and only 429 confirmed cases until now. Because of the low confirmed cases, and no new cases, the latest satisfaction poll shows president Tsai’s highest approval rating of 70.3% in April.”

This is reflected in the survey showing only 30% of people’s incomes have fallen, while 68% have remained the same.

Taiwan’s manufacturing industry is known by its flexibility, efficiency and high quality, and after outlining a ‘Taiwan can help’ policy, Taiwan donated 100 million masks to the US, EU and other countries 
 - Szu-Min Chien

The government has also shown its productive efficiency by co-working with industry to produce surgical masks, speeding up mask production from 1.88 million a day in February to 16 million a day by the end of April.

“Taiwan’s manufacturing industry is known by its flexibility, efficiency and high quality,” notes Chien, “and after outlining a ‘Taiwan can help’ policy, Taiwan donated 100 million masks to the US, EU and other countries.”

No one, of course, expects Taiwan not to be affected by the global downturn, and there are dissenting voices, one of whom is Friedrich Wu, a professor at Nanyang’s Technological University, who says: “Taiwan’s economic performance in the past five years has been mediocre, averaging only 2.1% per annum between 2015-2019.

“President Tsai Ing-wen’s administration has been blamed for the performance deficit. She nearly lost the presidential election last year until the eruption of pro-democracy protests in Hong Kong, which she exploited against KMT’s supposedly pro-China candidates.

“She won the election because of voters’ fear of China, not because of voters’ approval of her last term’s performance.”

Professor Wu also believes Taiwan’s economic growth will be “dismal” and cites longer-term problems, including a population ageing faster than those in China, Hong Kong, Singapore and South Korea. Another issue is underinvestment in higher education and research and development, resulting in a low level of innovation.

Still, for the time being, Taiwan is avoiding the worst effects of the pandemic, and for that reason alone investors have much to be thankful for.