Economist warns of 'K-shaped' growth despite higher GDP

Taipei, Jan. 10 (CNA) Despite Taiwan's per capita GDP forecast to top US$40,000 in 2026 amid the AI boom, an economist warned of industrial "K-shaped" growth, which will result in low wages in certain domestic demand-oriented industries.

Dachrahn Wu (吳大任), director of National Central University's Research Center for Taiwan Economic Development, told CNA that Taiwan's economy is largely driven by exports in the current AI era, but the performance has diverged in a "K" shape.

"K" shaped growth refers to a divergence of performance of different sectors with some moving higher but others lower, making the economy look like the arms of the letter "K."

According to the Directorate General of Budget, Accounting and Statistics (DGBAS), Taiwan's GDP per capita is expected to hit US$40,951 in 2026, up from US$38,748 estimated for 2025.

The local economy is expected to grow 7.37 percent in 2025, a high in 15 years, boosted by robust exports, and will grow an additional 3.54 percent in 2026, the DGBAS's November forecast showed.

Among the 11 million people employed in Taiwan, the services sector hired more than 7 million in relatively low-pay jobs, while the electronics industry, the major AI beneficiary, hired only 1 million, including 300,000 in the semiconductor segment, which tended to offer higher pay, Wu said.

The DGBAS data indicated average aggregate earnings, which include regular wage and nonregular wage such as bonuses, in the electronics industry hit NT$1.12 million (US$35,443) during January-October 2025, while the figure of the computer/optoelectronics industry reached NT$939,550.

In the service sector, average aggregate earnings of the hospitality and food/beverage industry stood at NT$391,440 and the figure in the support services industry, which is comprised of travel agencies, was NT$414,710 during the same period, the data showed.

Wu said as the service sector serves as the largest employer in Taiwan, with the "k" shaped development continuing, the impact on the sector would run deeper.

Wu said the first priority is to turn the service sector around. He added that the government should try hard to create business opportunities for the sector by boosting demand to solve the low wage problem and improve Taiwan's wage structure.

Kao Shien-quey (高仙桂), deputy head of the National Development Council (NDC), said in a recent legislative hearing that while the government will maintain Taiwan's lead in the global AI and semiconductor competition, it will also take advantage of AI to help old economy industries and the service sector to upgrade their operations.

Kao said such efforts are needed to strengthen domestic demand-oriented industries to have the entire industrial development tilt toward a balance.