By Chen Cheng-hui / Staff reporter

Standard Chartered Bank has raised its GDP growth forecast for Taiwan this year to 11.5 percent, up from its 9.5 percent in May, marking what it expects to be the strongest pace since 2010.

The bank also revised next year’s growth forecast upward to 6.5 percent from 5 percent previously, Standard Chartered senior economist for greater China and Asia Tommy Wu (胡東安) said in the bank’s latest global economic outlook released this week.

The forecasts are above the Directorate-General of Budget, Accounting and Statistics’ estimates of 11.05 percent for this year and 6.04 percent next year, which Standard Chartered attributed to artificial intelligence (AI)-related export growth and investment strength, as well as signs of improving domestic demand.

Photo: Bloomberg

“Our upgrade largely reflects faster-than-expected Q2 growth, fueled by AI-driven demand and a recovery in domestic demand, though we expect the year-on-year pace to drop sharply from Q4 onward as a high base effect weighs on exports and GDP,” Wu wrote in the report.

While the bank’s 6.5 percent growth forecast for next year is lower than the double-digit growth rate for this year, it is still significantly higher than Taiwan’s average growth rate of 4 percent over the past 10 years, he said.

In addition, the AI super cycle is expected to be sustainable, providing continued support for Taiwan’s exports and the capital investment, he said.

If demand for AI continues to rise, or if the tech boom accelerates and spreads to broader economic activity, Taiwan’s GDP growth still has room for upward revision, as growth would no longer powered solely by net exports, but also by domestic investment and consumption, he added.

Wu said the K-shaped divergence in Taiwan’s economy might become less pronounced as the tech boom spills over into consumer spending, but strengthening domestic demand would point to rising — but not excessive — risk of demand-pull inflation.

Standard Chartered maintained its consumer inflation forecasts of 2.1 percent for this year and 2 percent next year. The bank also kept its forecast of two 12.5-basis-point hikes by the central bank in December and March next year, taking the discount rate to 2.25 percent from 2 percent.