The AI-driven growth momentum continues to surprise on the upside. First-quarter GDP expanded 13.7% YoY, marking the second consecutive quarter of double-digit growth and accelerating from 12.7% in 4Q25. On a QoQ saar basis, growth remained exceptionally strong at 11.9%, following 23.6% in 4Q25. Net exports of goods and services remained the dominant growth driver, contributing 9.5ppt to YoY GDP growth in 1Q. Exports rose 35.3% YoY, outpacing import growth of 27.1%. Domestic demand also improved, contributing 4.2ppt to GDP growth. Private consumption rebounded 4.9% YoY, government consumption rose 3.9%, while gross capital formation increased 5.2%.
We revise up Taiwan’s 2026 GDP growth forecast to 9.4% from 7.0%, which would mark the strongest expansion since the post-GFC rebound in 2010. The AI-driven global hardware cycle is expected to remain resilient despite geopolitical tensions in the Middle East, continuing to support demand for semiconductors, servers, and broader ICT exports. Rising adoption of agentic AI is further accelerating computing demand, while policy support and corporate competition continue to drive expansion in data centers and AI infrastructure. Even with higher helium and other input costs from Middle East disruptions, leading semiconductor firms are expected to retain sufficient pricing power to pass through higher costs.
On a quarterly basis, GDP growth is likely to have peaked in 1Q and to gradually moderate thereafter. Growth should remain strong at around 10% in 2Q–3Q before easing to mid-single digits in 4Q. Non-ICT exports are likely to face increasing headwinds from a broader global demand slowdown. Meanwhile, higher energy, raw material, and logistics costs will compress corporate margins across transport, utilities, chemicals, and plastics, leading to softer investment momentum. Although administered pricing via CPC and Taipower may partially cushion pass-through, upstream cost pressures will still feed into CPI inflation, weighing on real household incomes and consumer purchasing power.
LNG supply remains a key structural constraint. Taiwan relies on LNG for around 50% of power generation, with roughly 30% of imports sourced from Qatar. Strategic storage covers about 11 days of demand. LNG shipments are secured through May, ensuring near-term stability. From June, diversification toward US LNG will begin, but US supply currently accounts for only around 10% of imports, leaving uncertainty over whether it can fully offset reduced Qatari volumes in 2H. Additional balancing measures—such as higher coal utilization and nuclear ramp-up—may be required. In a downside scenario, temporary, partial power rationing could be implemented.
Ma Tieying 馬鐵英, CFA
Senior Economist - Japan, South Korea, & Taiwan 經濟學家 - 日本, 南韓及台灣
[email protected]
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