ADB raises GDP growth for Taiwan to 11% this year

• By Crystal Hsu / Staff reporter

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Taiwan’s economy is heading for its strongest growth in decades as the global artificial intelligence (AI) boom drives a surge in technology exports and investment, moving the Asian Development Bank (ADB) to raise its forecast for the second time this year.

The bank yesterday raised its growth forecast for this year for Taiwan to 11 percent from 9.5 percent in July, putting the economy on track to grow at the fastest pace among the 50 Asia-Pacific economies covered by the bank. It lifted its forecast for next year to 5 percent from 4 percent.

The upgrade comes after growth accelerated to 14.1 percent in the first half, the strongest pace in five decades. Second-quarter GDP expanded 12.9 percent, fueled by booming demand for chips and technology products, as companies around the world race to build AI computing capacity.

Nvidia Corp showcases humanoid robotics equipped with its chips at Taipei International Convention Center on June 3.

Photo: CNA

Taiwan’s tech exports jumped 65 percent in US dollar terms during the first half, while real exports rose 28 percent. Imports increased 22 percent as companies stepped up investment in AI-related capacity ahead of expected demand, the bank said.

The surge is no longer confined to Taiwan’s export manufacturers. Private consumption grew almost 6 percent in the first half, compared with 1 percent last year, while fixed investment increased almost 10 percent. Rising equity prices, stable home values and higher wages outside the technology sector have helped improve consumer confidence, the bank said.

That momentum is likely to ease next year. Investment in data centers and computing capacity should slow as facilities approach planned capacity, while the exceptionally strong expansion this year would make gains harder to achieve, the bank said.

The outlook faces pressure from inflation. The bank kept its forecast for this year’s inflation at 2 percent, but cut its projection for next year from 1.8 percent to 1.7 percent. Inflation averaged 1.5 percent in the first five months before accelerating to 2.6 percent in June and 2.5 percent in July, as higher oil prices linked to the US-Israeli war on Iran and weather-related vegetable costs pushed up consumer prices.

Energy prices, food costs and firm domestic demand could keep inflation elevated, although state-controlled energy prices could limit the extent to which higher costs reach consumers.

The AI boom remains the biggest upside to the growth outlook, but Taiwan faces risks from prolonged fighting in the Middle East, higher energy and food prices, new US trade measures and tighter global financial conditions. A sudden slowdown in AI investment could hit exports and corporate spending.

For the 43 developing economies covered by the bank, growth is forecast at 5 percent this year and 5.1 percent next year, underscoring how much faster Taiwan is expanding as it benefits from the AI-led export cycle.