Taipei: The Taiwan Institute of Economic Research (TIER) on Monday raised its forecast for Taiwan's gross domestic product growth in 2026 to 4.05 percent, citing demand for AI and a recovery in private consumption.
According to Focus Taiwan, TIER, one of the leading think tanks in Taiwan, increased the country's GDP growth forecast by 1.45 percentage points from its previous estimate in November. Gordon Sun, director of TIER's Economic Forecasting Center, mentioned that the upgrade largely reflects an improvement in private consumption supported by wealth effects created by the booming stock market and an increase in car sales.
TIER has projected that private consumption will grow 2.50 percent, up from the previous estimate of 2.00 percent. TIER President Chang Chien-yi noted that a trade deal with Washington to lower tariffs on Taiwanese goods could lead to a reduction in import tariffs on cars imposed by Taiwan, potentially boosting domestic car sales.
Chang added that strong global demand for AI applications is expected to lead to increased investment by Taiwanese tech firms to cater to foreign buyers. Additionally, the reduction in U.S. tariffs from 20 percent to 15 percent without stacking them on existing most-favored-nation rates is likely to benefit old economy industries.
As a result, TIER has upgraded its forecast for Taiwan's private investment growth from 2.36 percent to 2.88 percent for 2026, with fixed capital formation growth forecast also raised from 2.15 percent to 3.05 percent. Furthermore, the think tank has raised its forecast for growth in Taiwan's exports of goods and services from 3.08 percent to 7.22 percent and import growth from 2.84 percent to 6.82 percent for 2026.
TIER maintained its forecast for inflation in 2026 at 1.66 percent, stating that falling international crude oil prices and steady services costs will stabilize the local consumer price index. However, climate change, a labor shortage, and geopolitical unease could pose negative factors.
The think tank also provided data indicating that the December composite index for the manufacturing sector, which gauges business sentiment among local manufacturers, rose 3.61 points from a month earlier to 97.22, marking the sixth consecutive month of growth. Additionally, the December composite index for the service sector increased by 1.21 points from November to 96.94, recording the third straight month of growth. The composite index for the construction industry rose 2.31 points to 102.45, ending an 11-month decline.