Taiwan's Economy Booms: 4.14% Growth Predicted for 2026 Fueled by AI

Taipei, Jan. 19 (CNA) Taiwan's economy is forecast to grow by 4.14 percent in 2026, driven by strong demand for artificial intelligence (AI), the Chung-Hua Institution for Economic Research (CIER) said Monday. The projection does not take into consideration the agreements reached in the recently concluded trade negotiations between the United States and Taiwan, which could boost the expected economic growth, CIER President Lien Hsien-ming (連賢明) said at a news briefing. The trade talks resulted in an agreement for the U.S. to cut tariffs on Taiwanese goods from 20 percent to 15 percent, without stacking them on the existing most-favored-nation (MFN) rates. For 2025, CIER said, Taiwan's economic growth is estimated to be 7.43 percent, slightly above the Directorate-General of Budget, Accounting and Statistics' forecast of 7.37 percent. The think tank said the uncertainty surrounding U.S. tariff policies had caused some upheaval, but early stockpiling by manufacturers and AI-driven investment and export momentum had become key growth drivers. Looking ahead to 2026, CIER said demand for AI hardware is expected to remain robust, supporting related imports and exports. However, due to high base effects, the growth is likely to be stronger in the first half of the year and moderate in the second half, it said. Economic growth is projected at 5.28 percent in the first half of the year, and 3.10 percent in the second half, according to CIER. On prices, CIER forecast that the consumer price index (CPI) will rise 1.64 percent in 2026, citing stable global commodity prices and falling oil prices. As for the exchange rate, CIER said conditions in 2026 would favor the gradual appreciation of the New Taiwan dollar, following its volatility last year. Appreciation pressure is expected to increase, given that the U.S. Federal Reserve cut interest rates three times in 2025, and Taiwan posted a merchandise trade surplus of US$150.12 billion with the U.S., the think tank said. It forecast that the New Taiwan dollar will strengthen from NT$30.88 against the U.S. dollar in the first quarter of 2026 to around NT$29.77 in the fourth quarter, with a full-year average of about NT$30.33, representing an appreciation of roughly 2.83 percent from 2025. Lien said the tariff agreement with the U.S. is expected to benefit Taiwan's traditional industries, its technology sector, and investment. Lower U.S. tariffs would allow Taiwan's traditional industries to compete more fairly, while the removal of the uncertainty over semiconductor tariffs would improve the prospects for technology investment, he said. Greater U.S.-Taiwan cooperation in strategic industries would also benefit startups and emerging sectors, Lien said.