Taiwan: Annual GDP growth will exceed 10%
2026-27 GDP forecast revision.
Group Research - Econs, Ma Tieying17 Aug 2026
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The final GDP estimate released on August 14 reaffirms strong growth in 1H. With an upward revision to 1Q, growth averaged 14.2% yoy in 1H. 1Q remained the peak, with growth easing from 15.4% yoy in 1Q to 12.9% in 2Q. On a qoq saar basis, growth moderated from 10.2% to 5.7%.

The K-shaped divergence narrowed, not only between external and domestic demand, but also across manufacturing and services. Exports of goods and services moderated to 21.2% yoy in 2Q from 35.4% in 1Q. Meanwhile, gross fixed capital formation accelerated to 11.4% from 8.0%, while private consumption picked up to 5.9% from 4.8%. As a result, net exports and domestic demand contributed 40% and 60%, respectively, to headline GDP growth in 2Q, compared with 70% and 30% in 1Q.

By industry, manufacturing growth eased to 18.3% in 2Q from 26.2% in 1Q, while services growth picked up to 10.4% from 8.3%, with notable gains in wholesale and retail trade, information and communication services, financial and insurance services, and entertainment and recreation.

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. The Directorate General of Budget, Accounting and Statistics (DGBAS) also revised up its 2026 GDP growth forecast to 11.1% and projects 6.0% growth in 2027. 

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.

Ma Tieying 馬鐵英, CFA

Senior Economist - Japan, South Korea, & Taiwan 經濟學家 - 日本, 南韓及台灣
matieying@dbs.com



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