Taiwan’s economy is on course to record its fastest growth in more than a decade this year as booming global demand for artificial intelligence (AI) infrastructure drives exports, investment and consumer spending, Academia Sinica said yesterday.
The research institute raised its forecast for Taiwan’s GDP growth this year to 10.16 percent, a sharp increase from the 3.71 percent projected in December last year.
“The upgrade reflects strong momentum from both domestic and external demand,” Academia Sinica Institute of Economics research fellow Lin Chang-ching (林常青) told a news conference in Taipei.
Photo courtesy of Academia Sinica
External demand is expected to contribute 5.13 percentage points to GDP growth, while domestic demand is forecast to add 5.03 percentage points, he said.
AI has been the economy’s key growth engine, although uncertainties remain over the durability of the technology investment cycle, Lin said.
Demand for AI hardware has evolved beyond a typical cyclical recovery and is increasingly linked to long-term global investment in cloud infrastructure and high-
performance computing, he said.
The trend has strengthened Taiwan’s position in the global technology supply chain, particularly in semiconductors, servers and related components.
Demand is expected to remain robust throughout the second half of this year, supporting exports of advanced chips and other tech products, Academia Sinica said.
Exports and imports of goods and services are forecast to grow 23.02 percent and 21.91 percent respectively this year, it said.
Corporate investment is also gathering pace as companies expand capacity and increase capital expenditure to meet demand from emerging technologies, it said.
Continued investment by foreign firms is expected to boost private investment by 9.79 percent this year, it said.
Domestic demand is likewise providing strong support, with private consumption projected to rise 3.6 percent, underpinned by growing household wealth and spending on overseas travel, Academia Sinica said, adding that private consumption increased 4.74 percent year-on-year in the first quarter.
Despite the rosy outlook, risks remain, Lin said.
While global AI investment is driving a new technology cycle, its sustainability will depend on future capital spending, the profitability of AI business models and the capacity of supporting infrastructure, he said.
In addition, inflation trends are mixed, as consumer prices rose an average of 1.7 percent in the first half of this year before accelerating to 2.6 percent last month, suggesting businesses are increasingly passing higher costs on to consumers, Academia Sinica said.
This year, consumer prices are expected to rise 1.95 percent, and producer prices are projected to increase 10.69 percent from a year earlier, it forecast.
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