Taiwan Significantly Raises 2026 GDP Growth Forecast to 9.64%

Driven by the strong demand for technological products in the AI era, the economic growth forecast for the region of Taiwan, China, was revised upward today. Despite the Iranian war lasting three months and driving up energy costs, the AI boom continues to support a surge in the local economy.

The statistical department in Taiwan issued a statement on Friday, forecasting a significant year-on-year increase of 9.64% in the gross domestic product (GDP) for the whole year of 2026, much higher than the previously estimated 7.71%.

The data shows that Taiwan's GDP for the first quarter grew by 14.55% year-on-year, not only higher than the median estimate of 13.70% surveyed by Bloomberg, but also the fastest growth rate since 1981. The statistical department clearly stated that the demand brought by AI construction has far exceeded expectations.

As a hub for global semiconductors and other advanced technologies, Taiwan has become one of the biggest beneficiaries of the AI era. Last year, Taiwan's economic growth was about 8.7%, ranking at the top globally. To meet the surging financing needs of AI capacity, Taiwan's technology companies have completed a record $14.5 billion in debt transactions since the beginning of this year.

This week, TSMC CEO CC Wei told employees that this year's profit-sharing dividends for employees will increase by more than 30% on average. This chip foundry for Nvidia and Apple recorded about $18.2 billion in profit in the first quarter of this year, more than double the same period two years ago. Driven by AI, Taiwan's stock market is approaching historical highs, and the market value of Taiwan's stock exchange has just surpassed India, becoming the fifth-largest securities market globally.

Despite the Middle East geopolitical conflicts disrupting the global oil market, Taiwan's economy remains robust under the prosperity of AI. As an economy that relies on imports for 96% of its energy, Taiwan's industrial output increased by nearly 14.2% year-on-year, which was announced this week. However, this growth rate is the lowest since March last year, indicating that high energy costs have begun to have a negative impact on industries other than technology, especially those related to oil and coal.

The strong economic growth also provides the monetary authority in Taiwan with the reason to raise interest rates for the first time since the end of 2023. Last month, the central bank's director, Jianyi Zhang, stated that if the Middle East conflict lasts more than 150 days, causing oil prices to soar beyond the absorption capacity of CPC Corporation, Taiwan, the central bank would consider tightening monetary policy.

At present, Taiwan's inflation rate, although gradually climbing, is still generally controllable. Bloomberg Intelligence economist Hyosung Kwon estimates that Taiwan's CPI for May will slightly rise from April's 1.7% to 2.1%. The Central Bank of Taiwan will hold its next quarterly monetary policy meeting on June 18th.