The Taiwanese Economy in March 2026

Following the U.S.-Iran ceasefire agreement, regional tensions remain elevated, and traffic through the Strait of Hormuz continues to be volatile. While export and manufacturing activity in most economies has thus far maintained an expansionary trajectory, the prospect of renewed negotiations and a substantive accord between Washington and Tehran remains highly uncertain. Prolonged disruption to Strait passage would materially amplify uncertainty in energy supply. International institutions have broadly revised down their global growth forecasts and simultaneously raised inflation projections. On balance, the economic outlook remains highly contingent on whether the Middle East conflict can be effectively de-escalated, given the dual pressures of slowing growth and rising inflation confronting the global economy.
On the domestic front, robust AI demand has driven rising requirements across related supply chains, while higher international commodity prices have strengthened restocking incentives. Manufacturing exports, output, and foreign orders registered notable gains in March, lifting the share of firms reporting favorable business conditions for the month. However, as the U.S.-Iran conflict persists and global economic uncertainty intensifies, firms have adopted a more cautious outlook for business conditions over the next six months. In the services sector, financial market volatility has increased amid the ongoing conflict; nonetheless, the banking industry has benefited from steady expansion in deposit and lending operations, tourism-driven consumption growth, and rising demand for wealth management services, while the insurance industry has been supported by heightened risk awareness and demand tied to public infrastructure investment and corporate capacity expansion. These factors underpinned solid operating performance and a positive assessment of current business conditions among financial service providers, though their six-month forward outlook has turned more guarded relative to the previous survey. The construction industry has faced constraints on project progress due to difficulties in waste disposal and rising material costs, while the real estate sector continues to contend with a sluggish housing market, subdued transaction volumes, and cautious attitudes among developers regarding new project launches and groundbreaking activity, resulting in insufficient market momentum and weak business conditions. Based on the institute's business survey and subsequent model calculations, the Composite Indicators for manufacturing and construction continued to decline in March, while the Composite Indicator for services turned upward.
In the current macroeconomic forecast update, despite widespread downward revisions to 2026 global growth projections by international institutions in response to the U.S.-Iran conflict, Taiwan has benefited from sustained strong AI demand that has prompted semiconductor and ICT industries to expand capital expenditures, thereby bolstering private investment momentum. Concurrently, AI-related applications, rising commodity prices, and front-loading effects have driven stronger export and foreign order performance for relevant products, significantly reinforcing external demand. Incorporating these factors, this forecast revises the projections for private investment and external trade. TIER estimates Taiwan's full-year 2026 GDP growth rate at 7.56%, an upward revision of 3.51 percentage points from the January forecast.
Turning to external trade, as the Lunar New Year concluded and working days normalized, alongside sustained robust global demand for AI infrastructure investment, shipments of electronic and ICT products experienced concurrent volume and price gains. Consequently, Taiwan's year-on-year export growth rate surged from 20.58% in February to 61.85% in March 2026. Among major export categories, year-on-year growth rates for both ICT and audiovisual products and electronic components improved markedly from February, with export values reaching USD 39.73 billion and USD 25.24 billion, respectively — both setting all-time monthly records — with export structure remaining highly concentrated in the electronics industry. The primary drivers included robust shipments of next-generation high-end servers fueled by global AI infrastructure investment, compounded by tightening upstream material supply in the electronics industry that elevated supply chain prices, producing a simultaneous volume-and-price growth dynamic. On the import side, the year-on-year import growth rate rose from 6.85% in February to 38.26% in March, primarily reflecting deepening international division of labor within the AI supply chain and import demand generated by export expansion, which drove significant growth in electronic components imports.
On the domestic production front, sustained expansion in demand for applications including artificial intelligence, high-performance computing, and cloud data services continued to bolster production momentum in the information and electronics industry. However, certain traditional industries partially offset these gains due to ongoing market competition and a still-gradual recovery in demand. The manufacturing production index stood at 139.92 in March, representing a month-on-month increase of 26.81% and a year-on-year increase of 30.73%. For the first quarter of 2026 in aggregate, industrial production grew 24.63% year-on-year, with manufacturing recording growth of 26.52%.
With respect to domestic consumption, the year-on-year growth rate for comprehensive merchandise retail sales was 4.64% in March, with department stores benefiting from booth renovations, the reinforced appeal of established brands, and incremental revenue from newly opened retail venues. Total retail sector revenue for March reached NT$405.6 billion, a year-on-year increase of 3.17%, with comprehensive merchandise retail sales growing 5.67% year-on-year. In food and beverage services, March revenue reached NT$87.6 billion, a year-on-year increase of 2.28%. Contributing factors included successful branch expansion and co-branding strategies by multiple restaurant groups, the continuation of Lunar New Year banquet demand, and stable growth in aviation passenger volumes that drove increased sales of airline catering. Cumulative food and beverage sector revenue for the first quarter of 2026 grew 3.84% year-on-year.
On the price front, although the U.S.-Iran military conflict drove up international oil prices and contributed to higher fuel costs in March, stable weather conditions increased vegetable and fruit supply, widening the year-on-year decline in vegetable and fruit prices and shifting the year-on-year growth rate for the food category from positive to negative. In addition, the conclusion of the Lunar New Year holiday led to a pullback in service prices for hotel accommodations and taxis, narrowing the year-on-year increase in the miscellaneous category. As a result of these combined factors, the overall CPI year-on-year growth rate declined from 1.77% in February to 1.20% in March, while the core CPI fell from 2.61% to 1.94%. On the producer price side, increases in petroleum and coal products, chemical materials, and plastic and rubber products — reflecting the upward pressure on international petrochemical raw material prices from the U.S.-Iran military conflict — drove the overall PPI year-on-year growth rate up from -0.57% in February to 2.53% in March, the highest level since April 2025. For the first quarter of 2026, the cumulative CPI year-on-year growth rate was 1.23%, while the PPI year-on-year growth rate was 0.17%.
Turning to the labor market, the average unemployment rate from January through March was 3.32%, down 0.01 percentage points from the same period in the prior year. With respect to negotiated working-hour reductions, while the metal and machinery industry continued to record the highest number of workers on reduced hours, the number of workers in that industry on such arrangements declined by 1,478 relative to end-January. On wages, average total earnings in February 2026 were NT$99,734, a year-on-year increase of 71.80%, while regular earnings stood at NT$48,494, up 2.51% year-on-year. Adjusting for price changes, real regular earnings grew 1.68% year-on-year, and real total earnings grew 1.41% year-on-year.
With respect to domestic financial markets, the weighted average lending rate on new loans extended by the five major state-owned banks (Bank of Taiwan, Land Bank of Taiwan, Taiwan Cooperative Bank, Hua Nan Commercial Bank, and First Commercial Bank) was 2.105% in March, up 0.019 percentage points from 2.086% in February. In equity markets, escalating uncertainty from the U.S.-Iran military conflict caused investor risk appetite to shift markedly more defensive; simultaneously, concerns that the conflict could disrupt energy production in the Middle East and impede transit through the Strait of Hormuz elevated inflation expectations and weighed on growth prospects. Under the influence of these multiple adverse factors, Taiwan's equity market reversed course, with the Taiwan Weighted Stock Index closing at 31,722.99 at end-March, a decline of 10.42% from end-February, while average daily trading volume stood at NT$816.665 billion. On the exchange rate, the significant withdrawal of foreign capital from Taiwan's equity market in March amid the U.S.-Iran conflict, combined with a strengthening U.S. dollar internationally, exerted depreciation pressure on the New Taiwan Dollar, which closed at NT$31.98 per U.S. dollar at end-March, a depreciation of 2.28% from end-February.

Business Survey Outcomes

The proportion of manufacturing firms that reported improved business conditions in the current survey period was 48.3%, an increase of 35.5 percentage points from 12.8% in the prior month. Conversely, the proportion of those reporting a deterioration was 8.7%, a significant decrease of 32.1 percentage points from 40.8% in the prior month. The remaining 43.0% assessed business conditions as unchanged, a slight decrease of 3.4 percentage points from 46.4% in the prior month.
Looking ahead, the share of manufacturers anticipating an improvement in business conditions over the next six months stood at 24.2%, a decrease of 17.5 percentage points from 41.7% in the prior month. Similarly, the proportion of firms foreseeing a deteriorating outlook was 10.4%, down 7.1 percentage points from 17.5% in the prior month. Meanwhile, the share of manufacturing firms expecting business conditions to remain unchanged increased 24.7 percentage points to 65.4% from 40.7% in the prior month.
The Manufacturing Composite Indicator for March stood at 95.95, down 0.89 points from the revised February reading of 96.84. The Services Composite Indicator increased to 97.50, up 3.92 points from 93.58 in February. The Construction Composite Indicator fell to 91.19 in March, down 5.26 points from 96.45 in February, marking its third consecutive monthly decline.

Analyses and Outlook of Industries

Following are manufacturers' sentiments that are industry-specific in the monthly TIER surveys:

Manufacturers’ sentiments that have been in decline in the March survey and are expected to deteriorate over the next six months include:
Motor Vehicles Manufacturing, Construction.

Manufacturers’ sentiments that have been in decline in the March survey, but are expected to improve over the next six months include:
None.

Manufacturers’ sentiments that have been in decline in the March survey and are expected to remain sluggish over the next six months include:
Wood and Bamboo Products Manufacturing, Cutlery and Tools Manufacturing, Transport Equipment Manufacturing and Repairing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Basic Civil Structure Construction.
　
Manufacturers surveyed who felt the March outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Rubber Products Manufacturing, Real Estate Investment.

Manufacturers surveyed who felt the March outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Soft Drink Manufacturing, Paper Manufacturing, Metal Structure and Architectural Components Manufacturing.

Manufacturers surveyed who felt the March outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Leather, Fur and Allied Product Manufacturing, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Education and Entertainment Articles Manufacturing, Restaurants and Hotels.

Manufacturers’ sentiments that have improved in the March survey and is expected to deteriorate over the next six months include:
Textiles Mills, Yarn Spinning Mills, Fabric Mills, Industrial Chemicals, Petrochemicals Manufacturing, Plastics and Rubber Raw Materials, Plastic Products Manufacturing, Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing.

Manufacturers’ sentiments that have improved in the March survey and is expected to remain upbeat over the next six months include:
Food, Slaughtering, Edible Oil Manufacturing, Flour Milling and Grain Husking, Prepared Animal Feeds Manufacturing, Glass and Glass Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Industrial Machinery, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electric Wires and Cables Manufacturing, Electronic Machinery, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Wholesale, Banks, Securities, Transportation and Storage.

Manufacturers’ sentiments that have improved in the March survey and the trend is expected to continue for the next six months include:
Manufacturing, Frozen Food Manufacturing, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Printing, Man-made Fibers Manufacturing, Chemical Products Manufacturing, Petroleum and Coal Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Iron and Steel Basic Industries, Electrical Appliances and Housewares Manufacturing, Communications Equipment and Apparatus Manufacturing, Audio and Video Electronic Products Manufacturing, Motor Parts Manufacturing, Motorcycles Manufacturing, Motorcycles Parts Manufacturing, Precision Instruments Manufacturing, Retail Sales, Insurance, Telecommunication Services.

Taiwan- Data and Forecast (24th April 2026)
NT$100 million, %