The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday raised its economic growth forecast for this year to 4.05 percent, up from the 2.6 percent estimate it made in November last year, citing a better-than-expected outlook for net external demand, domestic investment and private consumption.
US tariff policies and China’s overcapacity continue to drive divergent economic performance around the world this year, but the latest Taiwan-US tariff deal and global tech giants’ artificial intelligence (AI) investments are expected to support export growth and domestic demand momentum, the Taipei-based institute said in a report.
Exports are expected to grow 7.22 percent and imports are projected to increase 6.82 percent this year, up from previous estimates of 3.08 percent and 2.84 percent growth respectively, TIER said.
Photo: Ann Wang, Reuters
Private consumption is expected to increase 2.5 percent, up from a previous estimate of 2 percent, it said.
Growth in domestic investment and fixed capital formation were also adjusted upward to 2.88 percent and 3.05 percent, from 2.36 percent and 2.15 percent respectively, it added.
“For 2026, growth is expected to shift toward ‘warm’ both domestically and externally, with recovering private consumption and improved industry divergence,” the institute said, after releasing its business climate survey of local manufacturing, services and construction sectors last month.
The survey showed the composite indicators for local manufacturing, services and construction sectors all rose last month, with the manufacturing index rising for the sixth consecutive month, the services index advancing for the third month in a row and the construction index ending the previous month’s decline to return to an upward trajectory.
The institute’s manufacturing index reached 97.22 points last month, up 3.61 points from 93.61 in the previous month, as robust demand for cloud services, and AI and high-performance computing products drove momentum in domestic manufacturing, as uncertainties about US tariffs faded.
A separate survey of manufacturing firms found that 34.5 percent of firms last month anticipated an improvement in their business over the next six months, a 12.5-percentage-point increase from the 22 percent in November.
Conversely, 18.4 percent of firms foresee a deteriorating economic outlook, down 6.8 percentage points from the 25.2 percent reported one month earlier, TIER said.
The services index climbed 1.21 points to 92.44 last month, up from the previous month’s 91.23, as the sector benefited from Christmas celebrations, New Year’s Eve gatherings, year-end banquets and concerts, along with operators’ partnerships, promotions, new product launches and overseas expansion, the institute said.
The construction index was up 2.31 points to 102.45, from November’s 100.14, boosted by the acceleration of year-end public works projects and semiconductor facility projects.
However, the government’s new soil disposal regulations create challenges in disposal channels and execution, potentially affecting project progress, TIER said.
Moreover, lenders’ mortgage policies, the central bank’s continued credit controls, developers’ inventory adjustments and the implementation of the new soil disposal policy could influence the real-estate market, it added.
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