UBS raises Taiwan's GDP growth forecast to 9.9% for 2026

Taipei, June 22 (CNA) Switzerland-based banking group UBS has raised its forecast for Taiwan's 2026 gross domestic product growth to 9.9 percent, up from an estimate of 8 percent made in April.

In a statement Monday, William Deng (鄧維慎), a UBS senior economist for Asia, said Taiwan's economy was expected to grow at a double-digit pace "with ease" in the second quarter on strong exports after growing at a 14.5 percent clip in the first quarter.

After an initial post-oil shock moderation in March, Deng said, Taiwan's manufacturing PMI improved in April and May to hit a recent high of 56.1, which significantly outperformed emerging markets in the region and around the world.

Another favorable factor for Taiwan's economy was the signing of a memorandum of understanding by the United States and Iran on ending military operations in their conflict, meaning that geopolitical uncertainties are expected to be reduced, Deng said.

"We further upgrade our 2026 GDP growth projection (for Taiwan) to 9.9 percent, compared to the current consensus of 9.2 percent," Deng said.

Before the latest upgrade on Monday, UBS had upgraded its forecast of Taiwan's GDP growth to 8 percent in April from an estimate of 6.9 percent made in February.

UBS appeared slightly more upbeat than Taiwan's government as the Directorate General of Budget, Accounting and Statistics (DGBAS) forecast in May that the economy will grow 9.64 percent this year.

Exports, which accounted for 69.5 percent of Taiwan's GDP in 2025, have been the main driver of overall economic growth, increasing 48.7 percent in the first five months of 2026 year-over-year after increasing 34.9 percent in 2025 from a year earlier.

Exports of AI-related servers and semiconductors, which are fueling the massive build-up of AI infrastructure in the United States, have been the main factor in pushing outbound sales to record levels.

On inflation, UBS did not expect it would have a major impact on Taiwan the rest of the year.

Although Taiwan's consumer price index (CPI) rose 2.2 percent in May, the increase largely reflected a spike in energy prices amid geopolitical unease in the Middle East and was relatively mild compared with other economies in the region, Deng said.

UBS has projected Taiwan's CPI will grow 1.9 percent in 2026, compared with 1.93 percent forecast by the DGBAS. Deng said Taiwan's inflation outlook remained "moderate" and its inflationary risks were "manageable."

Taiwan's central bank left its key interest rates unchanged in a quarterly policymaking meeting last week for the ninth consecutive quarter.

The bank said the decision reflected relatively mild domestic inflationary pressures and would help support steady economic growth and financial market stability.

The central bank has also projected the local CPI to grow 1.91 percent in 2026, up from an estimate in March of 1.80 percent.

UBS said the banking group has maintained its view that Taiwan's central bank will keep interest rates unchanged due to "effective inflation smoothing from the government, modest domestic loan growth, and overall moderate housing price changes."