By Crystal Hsu / Staff reporter

Taiwan’s economy expanded 7.64 percent in the third quarter, beating the government’s August forecast by 4.73 percentage points, thanks to surging global demand for artificial intelligence (AI) applications and next-generation technology products, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.

The performance marked the fastest quarterly growth in more than a decade and underscored Taiwan’s critical role in global semiconductor and high-performance computing chips supply chains, as companies worldwide accelerate investment in AI and cloud infrastructure.

The strong economic growth last quarter might prompt the agency to raise its full-year forecast, as global banks and local private think tanks have upgraded their projection to more than 5 percent.

Photo: CNA

DBS Bank Ltd (星展銀行) had the most optimistic forecast, expecting the nation’s economic growth to reach 5.6 percent this year.

“Full-year GDP growth is bound to exceed 5 percent” when projections are updated this month, DGBAS senior executive officer Chiang Hsin-yi (江心怡) said.

The official forecast is 4.45 percent.

The government had been conservative in earlier projections due to concerns over US tariffs, geopolitical tensions and other economic headwinds, Chiang said.

However, as trade talks progressed, the tariff scope and rates turned out to be narrower than initially feared, while Washington’s move to exempt US-based investments reduced potential downside risks, Chiang added.

“These developments, combined with strong AI demand and front-loading of orders, contributed to the stronger-than-expected performance,” she said.

Exports rose 36.5 percent year-on-year in the July-to-September quarter, surpassing earlier estimates by 7.4 percentage points, led by strong shipments of advanced semiconductors, AI servers and next-generation smartphones, the DGBAS said.

Overall, external demand contributed 7.21 percentage points to third-quarter growth, accounting for 94 percent of the economic expansion, it said.

Imports also rose sharply, up 24.91 percent, reflecting aggressive capital spending among semiconductor manufacturers and their suppliers.

Imports of capital goods surged by 47.69 percent as chipmakers expanded production capacity and invested in advanced manufacturing equipment.

Domestic demand lagged behind, with private consumption growing 0.92 percent, supported by spending on leisure activities, information technology products, stock trading and outbound travel, partially offsetting weak car sales, and flat restaurant and retail revenue, the DGBAS said.

Consumer spending is expected to pick up following the government’s NT$10,000 cash handouts, officials said.

Government consumption rose by 0.08 percent, contributing minimally to overall growth.

The data highlighted Taiwan’s position as a primary beneficiary of the global AI investment boom, alongside major chipmaking economies such as South Korea and the US.

With semiconductor and high-tech export momentum expected to continue into next year, Taiwan’s growth outlook remains strong, Chiang said, but added that geopolitical tensions, global technology cycle fluctuations and trade policy uncertainties could pose risks.