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2026 Taiwan Macroeconomic Outlook
6th November 2025
The Taiwan Institute of Economic Research (TIER) convened the “2026 Economic Outlook and Industry Trends Conference” on November 6, 2025. Under the leadership of Dr. Chien-Yi Chang, President of TIER, experts from various fields presented insights into Taiwan's 2026 economic landscape, analyzing domestic and international economic trends and offering in-depth perspectives on Taiwan’s industries.
Taiwan's economy delivered strong performance in 2025, with growth rates of 5.45%, 8.01%, and 7.64% in the first three quarters respectively. Trade and investment were the primary growth drivers, with exports, capital formation, and private consumption rising an estimated 28.55%, 6.90%, and 0.91% respectively during the first three quarters. The robust performance stemmed from the AI investment boom in the United States, which propelled Taiwan's equipment investment and goods exports, making the technology sector the main growth engine. However, U.S. tariffs and intense competition from Chinese overcapacity suppressed traditional manufacturing exports and automobile sales.
Looking ahead, while the global economy demonstrated resilience in the first half of 2025, it has shifted toward moderate deceleration since the second half. First-half growth was primarily driven by temporary factors such as front-loading of trade and inventory adjustments, rather than fundamental improvements. As these effects dissipated, economic indicators weakened and labor markets cooled. Combined with tariff-driven inflationary pressures in the U.S., international institutions generally expect global growth in 2026 to slow compared to 2025, with trade deceleration particularly pronounced.
The impact of U.S. tariffs continues to unfold, and global trade momentum is expected to further decelerate. However, rapid AI development has spurred a global investment wave that also benefits Taiwan, though contributions from private investment and net exports will weaken due to high base effects. On the domestic front, as listed companies' profitability grows, wages and dividend payments are expected to increase in 2026. Coupled with multiple government stimulus measures, the consumer market should gradually recover. Overall, considering the elevated base, economic growth momentum in 2026 is projected to moderate compared to 2025. According to the latest forecast released by the Taiwan Institute of Economic Research (TIER) in November 2025, GDP growth for 2026 is projected at 2.60%, down 3.34 percentage points from the revised 2025 rate of 5.94%.
Regarding private consumption, consumers have adopted a wait-and-see approach through the first three quarters of 2025, monitoring U.S.-Taiwan tariff negotiations for potential reductions in U.S. automobile tariffs. This led to cautious sentiment in the overall vehicle market. Additionally, increased overseas travel reduced durable goods purchases, and high base effects from recent years weakened private consumption momentum. Looking forward, to mitigate the economic impact of U.S. tariff policies, the government has rolled out multiple stimulus measures, including raising tax credits for vehicle trade-in programs, increasing special deductions for salaries, childcare, and elderly care, and adjusting tax brackets to boost household disposable income and stimulate domestic demand. Meanwhile, as U.S.-Taiwan tariff negotiations gain clarity and rising stock markets generate wealth effects, vehicle market sentiment and consumer confidence should improve. Therefore, private consumption growth for 2026 is forecast at 2.00%, up 1.06 percentage points from the revised 2025 rate of 0.94%.
For fixed capital formation, as AI opportunities continue to heat up, domestic semiconductor leaders are achieving record capital expenditures. Leading semiconductor firms are aggressively expanding advanced process and high-end packaging and testing capacity, driving synchronized investment increases across upstream and downstream supply chains. Companies are also continuously strengthening R&D investments, and several international corporations have established R&D centers and data centers in Taiwan, all supporting private investment momentum and causing 2025 private investment to outperform expectations. Looking ahead, while semiconductor companies and the government will continue to invest actively in advanced processes, AI infrastructure, and energy transition, and traditional industries will also pursue high-value transformation to enhance product added value and profitability, overall growth will moderate due to high base effects. Fixed capital formation growth for 2026 is forecast at 2.15%, down 7.90 percentage points from the revised 2025 rate of 10.05%. Private investment growth in 2026 is projected at 2.36%, down 8.61 percentage points from the revised 2025 rate of 10.97%.
In trade, benefiting from continued expansion of AI applications and innovation in consumer electronics, plus the absence of announced U.S. semiconductor tariff policies, Taiwan's electronics and ICT product exports performed exceptionally well with additional support from front-loading. However, traditional industries such as petrochemicals, steel, textiles, and transportation equipment faced constraints from U.S. tariff policies and intense competition from Chinese overcapacity. Global market demand remained weak, with companies generally adopting conservative order books, reflecting clear industrial divergence and economic disparity in the export structure. Looking forward, as U.S. tariff impacts continue to materialize and front-loading effects fade, global demand momentum will significantly slow, resulting in trade volume growth below 2025 levels. According to the IMF's October 2025 forecast, global trade growth will decline from 3.6% in 2025 to 2.3% in 2026. While AI-related demand provides support, high base effects will cause electronics and ICT product export growth to moderate. Accordingly, export and import growth rates for 2026 are forecast at 3.08% and 2.84% respectively, with exports down 21.90 percentage points and imports down 22.22 percentage points compared to 2025.
Regarding prices, Taiwan's average CPI growth rate for the first nine months of 2025 was 1.77%, with approximately 80% of the increase attributable to food and housing prices. As typhoon and heavy rain impacts diminished, vegetable supply stabilized, driving prices lower. The property market remained sluggish, and rental price growth is expected to further decelerate as housing prices decline. Simultaneously, reduced commodity taxes on automobiles and motorcycles, along with relatively stable international oil prices, further suppressed inflationary pressures, maintaining an overall moderate downward CPI trend. Looking to 2026, as global inflationary pressures ease, prices will continue their gradual decline. However, climate change, labor shortages, and geopolitical risks may still elevate cost pressures. The CPI growth rate for 2026 is forecast at approximately 1.66%.
Looking ahead to 2026, the global economy will continue to face numerous challenges. U.S. trade policy, Chinese industrial adjustments, AI development prospects, geopolitical conflicts, and climate change are particularly critical, affecting not only Taiwan's export performance but also influencing domestic demand and consumption through financial markets and import prices. These factors warrant advance assessment and close monitoring.
Regarding U.S. trade policy, President Trump announced multiple tariff policies in 2025, including reciprocal and Section 232 tariffs, affecting all trading partners. Taiwan's trade surplus with the U.S. actually increased in 2025 due to strong AI product sales. This may trigger new U.S. trade policies toward Taiwan, whether requiring Taiwanese firms to increase U.S. investments, purchase more U.S. goods or invest in U.S. Treasury bonds, or demanding currency appreciation. Since the U.S. has become Taiwan's largest export destination, changes in U.S.-Taiwan trade policy will impact Taiwan's export performance and related investment data.
Second, China's low-price goods exports have expanded dramatically in recent years, partly due to cooling real estate markets leaving steel and construction machinery capacity unutilized, and partly due to overcapacity in local government-subsidized solar, electric vehicle, and wind power equipment. With insufficient domestic demand, Chinese enterprises have aggressively exported at low prices, not only inviting trade measures from various countries but also adversely affecting Taiwan's steel, petrochemical, and cement industries. However, since mid-2025, the Chinese government announced multiple production reduction policies, impacting international commodity and steel markets, with international prices beginning to stabilize. If China continues adjustments in other overproduction industries, it will positively benefit Taiwan's non-ICT industries both domestically and internationally.
AI-related products have been Taiwan's main export driver since 2024, effectively boosting investment in 2025 and becoming Taiwan's primary economic momentum. However, according to an MIT report, while AI investment increases by hundreds of billions or even trillions of dollars annually, only 5% of companies currently generate million-dollar-level benefits from generative AI, mainly in media and technology sectors. Traditional manufacturing, services, and financial industries have yet to realize benefits. Based on nearly forty years of technological innovation including personal computers, internet, and mobile devices, the time lag for commercial adoption typically requires 10 years. Current AI investment is massive but results are disproportionate. If U.S. technology companies reduce investment due to cost-benefit considerations, it will adversely affect Taiwan's technology exports.
Finally, geopolitical risks and climate change remain significant sources of uncertainty for the global economy. The Russia-Ukraine war has yet to conclude, and Middle East tensions have intensified due to conflicts between Israel and neighboring countries, causing frequent volatility in energy and commodity markets, affecting global supply chain stability, and keeping inflationary pressures elevated. While some countries actively diversify production bases, strengthen energy independence, and build strategic reserves to mitigate impacts, overall supply chain risks remain difficult to eliminate completely. Meanwhile, climate change impacts are intensifying. This summer, extreme weather including high temperatures, droughts, and heavy rainfall occurred globally, disrupting food and energy supplies and increasing uncertainty for inflation and economic growth. Frequent extreme weather events also drive up infrastructure maintenance and insurance costs, presenting long-term structural challenges. Overall, the interplay between geopolitical and climate risks warrants close monitoring and prepared response strategies.
Communications Department
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Taiwan- Data and Forecast
6th November 2025
(NT$100 million, 2016=100), %
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