Taiwan to enjoy retail recovery by end-2021

Not even the spike in COVID-19 cases in May tempered consumer confidence.

Taiwan's retail sector is expected to see a recovery as soon as by the end of 2021, as the country is expected to see a growth in household spending for the year, according to a report from Fitch Solutions.

The country is expected to see conventional growth by 2022.

Real household spending is projected to grow 2.4% year-on-year (YoY) in 2021, a recovery from the 1.3% over 2020 caused by the pandemic. In 2021, spending is tipped to reach $359.8b (TWD10.0t), already higher than the total spending of $315.5b (TWD9.8t) reached in 2019 before the pandemic.

Consumer confidence in Taiwan took a hit in May, following a spike in COVID-19 infections on the island and the introduction of some of the most stringent countermeasures since the health crisis began.

“At the peak of the crisis, however, consumer sentiment in Taiwan was at its lowest in more than ten years and this latest infection spike will impede confidence levels returning to pre-crisis levels,” Fitch added.

Further government stimulus measures were announced in May and this is likely to continue supporting confidence levels, by protecting Taiwanese households against the ongoing economic impacts of the crisis on employment and incomes, the report noted.

The downturn in sentiment is reflected in the country's retail sales data, which reported growth of just 2.8% YoY in May, down from 18.3% in April and below the monthly average of 6.8% achieved between July 2020 and April 2021.

Much like elsewhere in the world, the report emphasized that a notable recovery in consumer spending will rely on the ability of authorities to vaccinate a large enough proportion of their populations and bring in COVID-19 infections and hospitalisation rates to a drop.

Fitch noted that Taiwan’s initial success in controlling the spread of the virus and the resultant low infection rates led to the government being relaxed about the relatively late and slow start to its vaccination programme.

“However, in response to criticism of the slowness of the programme, following the spike in infection rates from May 2021 onward, the CECC announced on 2 June that it was to launch a large-scale COVID-19 vaccination programme starting later that month,” the report stated.