Taiwan economic growth in 2026 to be highest in 39 years: CIER

Taipei, Oct. 16 (CNA) Taiwan's economy will grow at its fastest pace in 39 years in 2026, supported by both domestic demand and exports, the Chung-Hua Institution for Economic Research (CIER) forecast on Friday.

The think tank raised its growth forecast to 12.16 percent for 2026, up 1.81 percentage points from its previous forecast of 10.35 percent made in July.

If the forecast is accurate, the pace of growth would be the fastest since Taiwan's economy grew 12.75 percent in 1987, according to government statistics.

"This is a very strong year, with both domestic and external demand performing very well," CIER President Lien Hsien-ming (連賢明) told reporters before the presentation, according to the Liberty Times.

Domestic demand is expected to contribute 55 percent of the overall projected annual growth, while net overseas demand would account for the remaining 45 percent, according to the CIER's presentation.

Much of the economic momentum continues to be driven by strong demand for AI-related products, which has supported robust export growth and stronger investment and consumer spending, according to the think tank.

Based on the CIER's figures, its upward revision of growth from July was largely due to expectations of higher growth in domestic demand rather than exports.

In terms of domestic demand, Lien said global cloud service providers were continuing to expand capital expenditures, leading local manufacturers to increase capacity.

That rise in capacity, combined with increased investment in automation by non-tech industries, led the CIER to project private investment to grow 10.77 percent in 2026, according to Lien.

Private consumption is forecast to grow 4.94 percent, the think tank said.

The CIER's projection of overall growth would easily surpass Taiwan's 8.76 percent growth in 2025, though the quarterly pace is expected to ease at the end of the year.

The think tank estimated third-quarter growth of 12.73 percent, followed by 8.20 percent in the fourth quarter as a higher base of comparison weighs on the year-over-year figure.

The fourth-quarter forecast was raised from July's estimate of 6.04 percent. Taiwan recorded growth of 15.43 percent and 12.93 percent in the first and second quarters, respectively, government data cited by the think tank showed.

Taiwan's high projected growth rate contrasts with expectations of moderated economic activity globally.

Citing S&P Global's September projections, the CIER noted that world economic growth was expected to slow to 2.41 percent this year from 2.90 percent in 2025, marking the weakest performance since the COVID-19 pandemic.

In assessing Taiwan's outlook, the CIER highlighted continued expansion in capital spending by major cloud service providers, but pointed to uncertainties over potential financing requirements and diverging cash flow performance as issues to watch.

It also cited monetary policy changes in major economies, financial market movements, domestic investment, geopolitical risks and cross-Taiwan Strait relations as potential drags on Taiwan's high-growth environment.

On prices, the CIER forecast annual inflation of 2.06 percent, slightly above its July estimate of 2.02 percent and last year's inflation rate of 1.66 percent. Fourth-quarter inflation was projected at 2.42 percent.

For 2027, the institute raised its growth forecast to 5.97 percent from 3.71 percent in July, pointing to continued expansion at a more moderate pace.