Taiwan Country Risk Report Q3 2015 - New Study Released

Core Views

* Taiwan's economy slowed in Q114 likely on the back of a moderating expansion in private consumption and exports. While we remain fairly constructive on Taiwan's trade prospects in the near term, we do not believe that recovering demand in the US and Europe will be able to overcome the drag from China's slowing economy, which will inadvertently weigh on the island's economy given its heavy reliance on the mainland. We therefore are happy to maintain our below-consensus (3.2%) real GDP growth forecast of 3.0%.
* From a political perspective, the recent student protests against the trade pact with mainland China may catalyse a widening divide within the ruling Kuomintang (KMT) party, which would inadvertently lead to some instability within the political environment. In the event that the trade pact is rescinded, Taiwan could suffer longer-term economic implications stemming from not only a deterioration in ties with China, but also the inability to establish much-needed free trade agreements with its other trade partners.
* The recent acceleration in Taiwan's consumer price inflation is more likely a result of weather-related food price inflation than a sustained pickup in economic activity. As pressures from food prices start to abate, while economic growth remains fairly moderate, inflationary pressures will remain well contained. We expect monetary conditions to remain accommodative given that the central bank remains cautious towards the island's economic growth prospects.

Full Report Details at
- http://www.fastmr.com/prod/1003963_taiwan_country_risk_report_q3.aspx?afid=301

Key Risks To Outlook

* Downside Risks To Growth Forecast: Should we see a re-emergence of a crisis in the eurozone, or a downward spiral in China's economy, we can expect Taiwan to head into a sharp recession

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