AI boom prompts ADB to lift Taiwan growth outlook to 11%

Taipei, Sept. 23 (CNA) The Asian Development Bank (ADB) on Wednesday raised its forecast for Taiwan's gross domestic product (GDP) growth in 2026 to 11 percent, citing a surge in artificial intelligence (AI)-related exports.

In its Asian Development Outlook September 2026 report, the ADB raised its projection for Taiwan, designated as "Taipei,China" in the report, by 1.5 percentage points from its July projection, saying the economy had benefited from the AI boom in the first half of 2026 despite global shocks.

Taiwan's economy grew 14.1 percent in the first half of the year, its fastest first-half growth in 50 years, with the economy expanding 12.9 percent in the second quarter, the report said.

Customs data showed technology exports rose 65 percent in U.S. dollar terms in the first half of 2026, while national income data showed total exports increased 28 percent, according to the report.

Imports rose 22 percent, mainly reflecting AI-related fixed investment and inventory buildup to meet expected strong demand for technology products, the report said.

Private consumption grew nearly 6 percent in the first half of the year, up from 1 percent in 2025, supported by the buoyant growth outlook, higher stock prices, stable property prices and wage growth spilling over from the technology sector to other industries, according to the report.

Businesses also remained optimistic, increasing fixed investment by nearly 10 percent, while inventory accumulation amounted to 0.7 percent of GDP.

The ADB said technology exports are expected to remain the main driver of Taiwan's economic growth, citing a positive economic monitoring indicator for the seventh consecutive month in June and continued announcements of large-scale investments in AI infrastructure and data centers.

Growth is expected to moderate in 2027 as investment growth slows after capacity expansion meets demand and strong growth in 2026 creates a high comparison base.

Nevertheless, the ADB raised its 2027 growth forecast for Taiwan to 5 percent from 4 percent in July.

The bank maintained its 2026 inflation forecast at 2 percent, saying inflation is expected to remain broadly stable over the next two years.

Inflation averaged 1.5 percent from January to May before rising to 2.6 percent in June and 2.5 percent in July, as the conflict in the Middle East pushed up oil prices and adverse weather increased vegetable prices, the report said.

Higher global energy prices, higher food costs linked to El Niño, continued strong domestic demand and base effects from last year's low prices are expected to push inflation higher, the report said.

However, efforts by state-owned energy companies to restrain domestic oil prices should limit the impact on overall inflation, the ADB said.

The report said Taiwan's export outlook depends heavily on the AI-driven investment cycle remaining robust, which currently appears likely.

However, a prolonged conflict in the Middle East or worse-than-expected El Niño conditions could weaken global demand by driving up energy and food prices, the report said, potentially dampening AI investment and reducing demand for Taiwan's exports.