The landmark Taipei 101 building and city skyline seen from the Elephant Mountain Observation Deck in Taipei City on April 14, 2025. (Photo: I-Hwa Cheng/AFP) (Photo: I-HWA CHENG/AFP via Getty Images)
Chen Yihua | AFP | Getty Images
While the Taiwanese government’s double-digit GDP growth forecast for 2026 may reflect optimism for an AI economy, growth is likely to slow over time given the slowdown in capital investment, the risk of macroeconomic downturn, and the country’s high concentration in the semiconductor industry.
Earlier this month, Taiwan’s Bureau of Statistics announced that it expects GDP growth to be 11.05% this year, higher than the 9.64% forecast released in May. Taiwan’s weighted stock index has risen more than 56% since the beginning of the year, supported by demand for AI in the tech industry.
Taiwan
“I think it’s important not to extrapolate too far into the future with this year’s unusual pace of growth,” said Saktyandi Supaat, head of currency research at Maybank.
Taiwan has benefited greatly from large investments by global tech companies as demand for AI-related products increases, but if the pace of AI investment slows, “that could translate into Taiwan’s exports, manufacturing and investment relatively quickly,” Spaat said.
Spaat added that Taiwan’s dependence on technology and semiconductors makes it particularly exposed to fluctuations in global technology and AI capital investment cycles and geopolitical developments.
These risks “call into question the long-term sustainability of this growth,” said Jeremy Tan, CEO of Tiger Fund Management.
Meanwhile, the possibility of higher global interest rates due to rising inflation risks could also weigh on Taiwan’s budding AI startups.
“Tighter global financial conditions could deepen the stock market pullback and increase stress in private credit markets,” said Caroline Wong, country risk analyst at BMI. “For AI startups, the impact of limited refinancing options for high-tech companies could lead to a slowdown in Taiwan’s investment growth.”
Wong also stressed that rising tensions with the Chinese government could dampen risk sentiment, and a pullback in investment could cause major semiconductor manufacturers to diversify their customers away from Taiwan.
Nick Marlo, EIU’s chief economist for Asia, said the pace of wage growth was another concern for Taiwan’s economy, as real wages remained stagnant even after a booming tech-heavy domestic stock market boosted consumer spending.
“All of this suggests that the dividends from the AI boom are not being spread evenly across the economy, including in a structurally sustainable way,” Marlo said.
UOB economist Ho Wei Chen said Taiwan’s ability to maintain its technological advantage is key to long-term sustainability.
“This requires continued investment in research and development, talent development, advanced manufacturing capabilities and next-generation technology,” Ho said.
