Taiwan: Strong double-digit GDP expansion to persist – DBS

DBS Group Research economist Ma Tieying revises Taiwan’s 2026 GDP growth forecast up to 11.6% from 9.4% and 2027 to 5.6% from 4.5%, noting that growth will exceed 10% and mark the strongest pace in more than three decades. The report highlights narrowing K-shaped divergence, balanced AI-driven prospects, and expects a gradual transition to steadier growth alongside a modest rate hike in late 4Q.

DBS upgrades Taiwan growth outlook

"We further revise up our 2026 GDP growth forecast to 11.6% from 9.4%—our third upgrade this year—and raise our 2027 forecast to 5.6% from 4.5%. Growth in 2026 would be the highest in more than three decades and only the second time since 2010 that Taiwan has achieved double-digit growth."

"We continue to expect AI-driven growth to transition from a supercharged pace toward a steady trajectory in 2H26-2027. The AI outlook remains balanced between structural optimism, driven by continued technological innovation, and cyclical caution, stemming from the external financing needs and electricity and regulatory constraints facing US hyperscalers."

"We expect the K-shaped pattern to continue narrowing through 2H26-2027. Domestic demand should receive further support from cumulative and sizeable wealth effects from the stock market, stabilization in the property market, and steady wage and employment conditions."

"We maintain our forecast for a 12.5bp rate hike in 4Q, bringing the policy discount rate to 2.125%. The central bank is expected to follow the DGBAS in upgrading its GDP forecasts at the September meeting."

"An immediate rate hike remains unlikely, as inflation pressure is not yet compelling and the November local elections are approaching. December is likely to be a more appropriate timing for a rate hike, as inflation would have remained above 2% for more than six months by then, while inflation expectations may be starting to rise and require anchoring."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)