AI Demand Propels Taiwan to Fastest Growth in Nearly Four Decades

Taiwan's statistics agency has sharply upgraded its economic outlook for 2026, projecting gross domestic product (GDP) growth of 11.05% — the fastest annual expansion the island has recorded since 1987, when growth hit 12.75%. The revised forecast, announced on Friday, marks a significant upward adjustment from the 9.64% estimate issued in May.

The upgrade is driven by explosive demand for artificial intelligence chips and related technology. Taiwan is home to the world's largest contract chipmaker, Taiwan Semiconductor Manufacturing Co., and plays a central role in supplying AI hardware to global tech giants such as Nvidia and Apple.

Statistics Minister Chen Shu-tzu acknowledged the pivotal moment, telling reporters that economic growth is robust and that AI development is critically important for Taiwan, warranting close monitoring.

The agency also revised its second-quarter 2026 growth estimate slightly upward to 12.93%, from a preliminary 12.92%. For 2027, the first forecast issued points to a more moderate but still solid expansion of 6.04%.

Exports are expected to surge 41.07% year-on-year in 2026, the fastest pace since 1976, up from a previous forecast of 39.77%. The economy had already expanded by 8.76% in 2025, reflecting the early stages of the AI boom.

On the inflation front, the consumer price index (CPI) is now projected at 2.07% for 2026, slightly above the central bank's 2% target and higher than the 1.93% forecast made in May.

Despite the strong growth and mild inflation overshoot, analysts expect the central bank to keep its policy rate unchanged. Elvis Lu of President Capital Management Corp. said the bank is expected to hold its policy rate steady through the end of the year. The central bank's next quarterly rate-setting meeting is scheduled for September 17.