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Polaris reduces 2011 forecast to 4.73% due to global uncertainty

Polaris Research Institute yesterday lowered its 2011 Taiwan growth forecast to 4.73 percent due to increased economic uncertainty across the globe.

According to Polaris President Liang Kuo-yuan, third-quarter growth narrowed by a big margin due to reduced private investment, consumption and exports.

He made the remarks at a news conference yesterday, where the institute announced it has lowered 2011 GDP growth forecast from 5.2 percent made in June to 4.73 percent. Next year's growth is estimated to be 4.51 percent.

Liang attributed the forecast decline to lowered growth rates for the third and fourth quarters. According to Polaris estimates, private investment has dropped 11.61 percent in Q3 compared to last year. At the same time, consumption and exports have also fallen amid various negative factors.

As for the fourth quarter, the economy may grow from Q3 due to increased consumption, in the lead-up to the presidential election in January next year.

The negative factors cited by Liang included the deepening European debt crisis and growing concerns over the U.S. economy.

“Chances of the U.S. experiencing negative growth for two consecutive quarters are small. The country is still experiencing moderate growth. However, we feel very unsafe about the U.S., and this feeling of unease will affect financial markets across the globe,” he said.

As for the European debt crisis, it is a bigger problem, Liang said. “At the current stage, we don't see anyone doing anything substantial to solve the crisis,” he said. “Given the internationalization of financial markets, a crisis in Europe will affect other countries in the world and will inhibit growth dynamics for Taiwan.”

Polaris further forecasted prices will grow 1.5 percent in 2011 and 1.56 next year. As for the exchange rate, the local currency will average NT$30 against the greenback during the fourth quarter and NT$29.4 for the entire 2011. Yesterday the New Taiwan dollar closed at NT$30.41 against the greenback, up NT$0.046.

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