Taiwan's Economy Soars with AI Growth, Projected to Reach 12.16% in 2026

Taiwan's economy is projected to achieve its highest growth in 39 years, driven by the explosive growth of the artificial intelligence (AI) industry, according to a national research institute.

On October 16, the Chung-Hua Institution for Economic Research (CIER) announced that it has significantly raised its forecast for Taiwan's real economic growth rate this year from 10.35% (previously announced in July) to 12.16%, an increase of 1.81 percentage points.

This marks the highest growth rate since Taiwan recorded 12.75% in 1987.

In terms of quarterly growth, Taiwan's economy showed strong momentum in the first half of the year, with growth rates of 15.43% in the first quarter and 12.93% in the second quarter. The growth rate for the third quarter is estimated to reach 12.73%. The fourth quarter is expected to see a growth rate of around 8.20%, influenced by a base effect from last year's high growth.

The growth drivers are attributed to a balanced contribution from both domestic demand and exports. Domestic demand is expected to account for 55% of the overall economic growth, while net exports, calculated as exports minus imports, are projected to contribute 45%. A stronger-than-expected recovery in domestic demand is cited as a key reason for the upward revision of the forecast.

CIER noted that the global AI boom is driving Taiwan's economy as a whole. The ongoing competition among global cloud companies for capital investment has led to increased production capacity among Taiwan's semiconductor and IT manufacturers, resulting in a virtuous cycle of rising exports, private investment, and consumer spending. Specifically, private investment is estimated to grow by 10.77%, while private consumption is projected to increase by 4.94% this year.

CIER President Lien Hsien-ming stated through local media that "this year has seen very strong performance in both domestic and external demand," explaining that global cloud service providers are continuously expanding their capital investments, allowing local manufacturers in Taiwan to enhance their production capabilities.