(Bloomberg) — Taiwan’s economy grew at its fastest since 1987, overcoming disruptions caused by the war in Iran as the island continues to ride demand for its tech products supporting the build-out of artificial intelligence computing.
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Gross domestic product expanded almost 13.7% in the first quarter from a year earlier, compared with about 12.7% in the previous three months, according to a statement by the statistics bureau in Taipei on Thursday. That exceeded all estimates in a Bloomberg survey of economists, whose median was for a slowdown to 11.3%.
The statistics bureau attributed the better-than-expected figure to surprisingly strong exports, investment and private consumption. Domestic demand contributed slightly more than 4 percentage points to last quarter’s growth, with its share climbing to the highest in a year.
“The tech super-cycle remains constructive despite all the noise from the Middle East conflict,” said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group Ltd. “Even if the headline figure moderates to single digits, the high base in the first quarter will easily place Taiwan as an outperformer in Asia.”
The surprise pickup eases concerns over the fallout on the economy from the shock to global energy prices following the war launched by the US and Israel against Iran. Taiwan’s exports — the cornerstone of the island’s $922 billion economy — reached an all-time high in March, jumping almost 62% from a year earlier.
More than three-quarters of Taiwan’s export goods are tech-related, according to Chiang Hsin-yi, a senior executive officer at the statistics bureau.
Taiwan’s economy was already among the world’s seven best performers last year, expanding close to 8.7%. The central bank and the statistics bureau had both forecast GDP growth at around 11.5% in the first quarter.
Following the data release, Bloomberg Economics raised its 2026 growth forecast to 8.5% from 6.5% previously.
What Bloomberg Economics Says…
“Higher crude prices linked to the Iran conflict are likely to weigh on the economy, given its heavy reliance on imported energy. Still, robust external demand tied to AI investment should sustain rapid expansion.”
— Hyosung Kwon. For full analysis, click here
The global AI spending spree has sent stocks in Taiwan soaring over the past year, with its market capitalization rising to around $4.5 trillion — overtaking the UK and Canada to become the sixth-largest in the world. Taiwan’s benchmark Taiex index is up almost 23% since the end of March and has notched four straight quarters of increases.
Consumption has benefited from a so-called wealth effect — the tendency for spending to increase as people enjoy gains in a booming market. That was one of the key drivers behind faster growth in retail sales in January-March, according to the statistics bureau.
Speaking at a briefing in Taipei, Chiang said the war has so far had a limited impact on Taiwan. The surprise last quarter came mostly from private consumption, she said.
While net exports contributed more than 9.6 percentage points to growth last quarter, according to the statistics bureau, consumption was the second-biggest driver with a share of about 2.7 percentage points.
The Lunar New Year holiday, which came close to a long weekend and was accompanied by good weather, boosted “people’s appetite for travel domestically,” Chiang said.
BNP Paribas SA economist Jeeho Yoon said the economy’s surprising acceleration presents “upside risks” to the French bank’s 2026 annual growth forecast of 7%.
“Aside from construction investments, data suggests positive momentum is gradually starting to spill over to domestic demand,” Yoon said. “While most of the growth thus far has been concentrated on the tech sector,” he said there’s “growing evidence that this could gradually spread to support consumption going forward.”
–With assistance from Fran Wang.
(Updates second chart.)
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