Taiwan’s forecast of 11% GDP growth likely not sustainable: economists

The Taiwanese government’s double-digit GDP forecast growth in 2026 may reflect optimism in the artificial-intelligence economy, but growth is likely to moderate over time given risks of capex slowdown and macroeconomic downturns, and with its high concentration in the semiconductor industry.

Earlier this month, Taiwan’s statistics agency said it expects its GDP growth to be at 11.05% for the year, up from ⁠9.64% forecast it issued in May. Taiwan’s weighted stock index has seen a growth of over 56% year-to-date, supported by AI demand for its tech industry.

“I think it is important not to extrapolate the exceptional pace of growth this year too far ahead,” said Saktiandi Supaat, head of FX research at Maybank.

While Taiwan has greatly benefited from huge investments by global tech companies amid growing demand for AI-related products, if the pace of AI investment slows, “this could feed relatively quickly into Taiwan’s exports, manufacturing and investment,” Supaat said.

Supaat added that Taiwan’s reliance on technology and semiconductors makes it particularly exposed to swings in the global technology and AI capex cycles, as well as geopolitical developments.

Jeremy Tan, chief executive officer of Tiger Fund Management, noted that such risks “put the long-term sustainability of such growth in question.”

Meanwhile, a potential rise in global interest rates due to rising inflation risks may also weigh on Taiwan’s budding AI startups.

“Tighter global financial conditions could deepen the pullbacks in equity markets, in turn increasing stress in private credit markets,” said Caroline Wong, country risk analyst at BMI. “For AI startups, the resulting impact of limited refinancing options for tech firms could lead to a slowdown in Taiwan’s investment growth.”

Wong also highlighted that risk sentiment may be dampened by heightened tensions with Beijing, and any pullback in investments could prompt customers of key chip manufacturers to diversify away from Taiwan,

The pace of wage growth is also another concern in Taiwan’s economy, as real wages have remained stagnant even after the booming tech-heavy domestic equities market has lifted private consumption, said Nick Marro, principal economist for Asia at EIU.

“All of this suggests that the dividends from the AI boom aren’t evenly dispersing through the economy, including in ways that would be structurally sustainable.,” Marro said.

UOB economist Ho Woei Chen said Taiwan’s ability to maintain its technological edge is key to its long-term sustainability.

“This requires continued investment in research and development, talent development, advanced manufacturing capabilities, and next-generation technologies,” Ho said.