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July 22, 2017

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ANZ reduces its Taiwan growth forecast citing political problems

TAIPEI, Taiwan -- Australia and New Zealand Banking Group Ltd. (ANZ) has slashed its forecast for Taiwan's gross domestic product (GDP) growth in 2014 due to the worsening political conditions in Taiwan.

The bank lowered its projection to 3.1 percent growth Saturday from its earlier estimate of 3.6 percent, after seeing the recent change in domestic growth profile.

Following the student campaign against a trade-in-services agreement with China and the anti-nuclear protests, "the heightened political risk is bound to curtail business and consumer confidence, which will likely drag capital expenditure and household spending in the second and third quarters," ANZ said in a research note.

However, the seven-in-one election to be held in November may offer a short-term boost for domestic spending, it added.

Despite the downgrade, economic growth for the year is still set to be higher than in 2013, when GDP grew 2.11 percent, according to ANZ.

ANZ also revised down its consumer price index forecast for 2014 to 1.26 percent from 1.52 percent.

Meanwhile, UK-based Barclays Plc also cut its forecast for Taiwan's 2014 GDP growth to 3.6 percent from its estimate of 4 percent in late March, citing a slowing pace of recovery in the local economy.

Barclays projected that, nonetheless, the country's exports and private consumption will grow faster in the second quarter following a rebounding trend in the first quarter.

Standard Chartered Bank, however, showed optimism toward Taiwan's economic outlook, maintaining its forecast at 3.9 percent.

Economic growth will be driven by a recovery in exports and strong gains in trade surplus, along with stronger growth in the manufacturing sector and rebounding consumer confidence that had risen to the highest level since 2011, said Tony Phoo, a Taipei-based economist at Standard Chartered.

In mid-February, the government raised its forecast of Taiwan's 2014 GDP growth to 2.82 percent from an earlier estimate of 2.59 percent.

In the recent events in Taiwan, students occupied the parliament building for 24 days, bringing legislative functions to a near standstill. They managed to force the government to agree to an item-by-item review of the trade agreement which would allow Taiwanese and Chinese companies greater access to each side's services sector.

The anti-nuclear protests also led to clashes with police. Protesters demanded the government scrap the Fourth Nuclear Power Plant, but the government says that would lead to power shortages and electricity price hikes.

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