‘SUPERCYCLE’:
Taiwan is poised to benefit from sustained semiconductor demand, although inflation is emerging as a key risk, economists from two foreign banks said

By Crystal Hsu / Staff reporter

Taiwan’s economy is forecast to remain one of the world’s fastest-growing this year as the artificial intelligence (AI) boom continues to drive exports, investment and corporate activity, with growth momentum holding firm despite renewed Middle East tensions, two major foreign banks said yesterday.

DBS Bank Ltd held its GDP growth forecast for Taiwan at 9.4 percent for this year, while Standard Chartered Bank kept its projection unchanged at 9.5 percent, citing sustained AI demand and Taiwan’s pivotal role in the global technology supply chain.

The upbeat outlook reflects Taiwan’s central position in the global AI ecosystem, with demand for advanced semiconductors, AI servers and high-performance computing equipment staying resilient despite geopolitical risks and uncertainty over global trade.

Photo: Lam Yik Fei, Bloomberg

“Taiwan is … in a key position to benefit from the global AI supercycle and sustained semiconductor demand,” Standard Chartered senior economist for greater China and North Asia Tommy Wu (胡東安) told a news conference in Taipei.

Standard Chartered said the benefits of the AI boom are extending beyond semiconductor companies and electronics suppliers, providing support to broader manufacturing and service sectors.

Higher wages in technology industries, rising income prospects and wealth gains are also helping boost household spending, Wu said.

“The broader recovery could help ease concerns over a K-shaped economy, in which AI-related industries have outperformed traditional sectors,” he said.

As economic growth accelerates, policymakers are shifting their focus from supporting expansion to managing the risk that rapid growth could fuel demand-driven inflation and unsettle inflation expectations, he said.

Authorities need to balance strong economic momentum with rising inflation risks, he added.

DBS senior economist Ma Tieying (馬鐵英) expressed similar views, saying inflation is emerging as a key risk.

DBS raised its consumer price index forecasts to 2 percent this year and 2.1 percent next year, from previous estimates of 1.9 percent and 1.8 percent respectively.

Energy-related pressure from Middle East tensions and delayed cost pass-through are likely to keep inflation close to 2 percent through the second half of this year and into next year, Ma said.

While export growth is expected to remain above trend this quarter, it is likely to gradually normalize next quarter partly due to a high comparison base, she said.

Shipments to the US, which are closely linked to AI demand, have shown signs of cooling, Ma said.

Technology exports are also beginning to normalize, although semiconductor prices remain elevated, she said.

Investment is also approaching a cyclical peak, with slower growth in capital goods imports suggesting companies are becoming more cautious about expanding advanced foundry and packaging capacity, she added.

Meanwhile, Taiwan’s housing market continues to consolidate under the central bank’s credit controls, limiting near-term growth in the property sector, Ma said.

Still, both banks expect domestic consumption to become a more important growth driver. Retail sales and food service improved in the second quarter, supported by a stable labor market, stock-market gains and a gradual stabilization in housing conditions.

“The outlook remains vulnerable to geopolitical tensions, energy market volatility, trade policy changes and the durability of the AI investment cycle, the two banks said.