Driven by the global wave of artificial intelligence, Taiwan's economy has accelerated strongly. In the fourth quarter of last year, its gross domestic product (GDP) increased by 12.68% year-on-year, setting the fastest growth rate in a single quarter since 1987 and significantly exceeding market expectations of 8.75%. The full-year GDP growth was 8.63%, which was also higher than the previous forecast range of 7.5%, indicating that the overall economic momentum far exceeded the original judgment of the outside world.
Lynn Song, chief economist for Greater China at ING, said the fourth-quarter data "continues to far exceed market expectations" and emphasized that Taiwan has always been "one of the major beneficiaries" in this round of technology boom. She pointed out that the outstanding performance in 2025 itself is built on "an already very strong foundation in 2024."
Against the backdrop of continued expansion in the construction of artificial intelligence-related infrastructure, a number of financial institutions have recently raised their forecasts for Taiwan's economic growth in 2026, and are unanimously optimistic that the wave of AI investment will continue and support economic performance this year and next year. Among them, Goldman Sachs Group has raised its forecast for Taiwan's economic growth in 2026 from 4.4% to 5.1%, which is significantly higher than the current official forecast of 3.67% by the Taiwan Central Bank.
In terms of corporate investment, as one of the world's most important advanced process wafer foundries, Taiwan Semiconductor Manufacturing Company (TSMC) this month released strong confidence in the long-term demand for AI. The company announced that it plans to set aside up to $56 billion in capital expenditures for 2026, much higher than the market's previous expectations, and forecast that revenue will grow by nearly 30% this year, faster than the average growth forecast by analysts. As one of Asia's most valuable companies, TSMC's large-scale investment plan is seen as a key endorsement of the prospects of the global AI industry.
Another important factor supporting Taiwan's optimistic economic outlook is the U.S.-Taiwan trade agreement just reached this month. According to the agreement, tariffs on some goods exported from the autonomous island to the United States will be reduced from 20% to 15%. The relevant arrangements are expected to further consolidate Taiwan's competitive advantage in the high-tech supply chain. At the same time, the agreement also encourages Taiwan-funded enterprises to increase investment and financing in the United States, with the amount up to US$500 billion. It is expected to deepen cooperation between the two places in the fields of high-end manufacturing and technology.
Domestic demand has also improved significantly. Data released by Taiwan's statistical agency on Friday showed that private consumption increased by 3.43% year-on-year in the fourth quarter of last year, the fastest growth rate since the second quarter of 2024. In order to boost the previously relatively weak consumption momentum, the authorities issued a cash subsidy of NT$10,000 (approximately US$318) to each citizen in November last year, which directly stimulated household spending. Michelle Lam, economist at Société Générale Greater China, pointed out that "household consumption has improved beyond expectations, and government cash payments have played a key supporting role."
Against this backdrop of growth, the Bloomberg Economics research team believes that Taiwan’s economic expansion momentum is expected to remain robust for some time to come. This resilience also means that the Taiwan Central Bank (the Central Bank of the Republic of China) has more room to maintain the current monetary policy stance without having to cut interest rates early in the second quarter of 2026 as previously expected. The latest view shows that the central bank's benchmark interest rate is expected to remain at 2% until the whole of 2026, which is significantly delayed from the previous expectation of "initiating interest rate cuts within this year."
Foreign trade also performed strongly. Taiwan's exports hit a record high in 2025, with more than 60% of exports exempted from US tariffs, covering high-end chips and other products where Taiwan has key advantages in the world. Taiwan's high-tech exports continue to remain competitive thanks to tariff exemptions as the U.S. government launches investigations into a range of key imports, including robots and medical equipment.
Driven by soaring exports, Taiwan's trade surplus with the United States also climbed to a record high last year, with the surplus reaching US$150.1 billion during the year, much higher than the US$64.7 billion in the previous year, and almost doubling. The simultaneous expansion of trade surplus and exports of AI-related products has strengthened the market's judgment that Taiwan is at the core of the new global technology cycle.