AI Darling Taiwan Extends Economic Growth Run Unseen Since 1987

Taiwan reported its fourth straight quarter of double-digit economic growth, the longest such stretch in nearly 39 years, as the AI boom increasingly spills over into stronger domestic demand.
Gross domestic product expanded 14.36% in the third quarter from a year earlier, according to a statement from the statistics bureau in Taipei on Friday. That exceeded all but one forecast in a Bloomberg survey of economists, whose median estimate was 12%.

Gross capital formation, a measure of investment used to calculate GDP, surged over 26% — the most in five years — with growth in private consumption holding above 5%. Domestic demand contributed more than 9 percentage points to last quarter's growth, with net exports accounting for slightly less than 5 percentage points.

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“Taiwan's economy remained exceptionally strong,” said Michelle Lam, Greater China economist at Societe Generale. “AI remained the central growth engine, but the impulse is increasingly broad-based. Strong AI demand continued to support exports while driving a surge in domestic capex.”

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Home to key suppliers of tech giants like Nvidia Corp and Apple Inc, Taiwan has been one of the biggest beneficiaries of the spread of artificial intelligence. The island's exports surged almost 61% to a record of over $87 billion in September, beating the forecasts of all economists surveyed by Bloomberg. 

“Inventories made a positive contribution, but the bigger driver came from private investment,” said Chiang Hsin-yi, an official from the statistics bureau. Private investment has been fueled by robust exports, she said, adding that the economy is now seeing strength on both the domestic and external fronts.

Taiwan Semiconductor Manufacturing Co., the world's largest contract maker of advanced chips, also delivered a better-than-expected revenue outlook for the fourth quarter after reporting a 69% jump in profit for July to September, even as concerns persist over whether the AI investment boom can be sustained.

The rapid expansion has also bolstered Taiwan's public finances. The cabinet proposed a record NT$3.93 trillion ($120 billion) spending plan for 2027, giving the government more room to fund priorities including defense. Under the proposal, overall military spending would exceed 3% of GDP.

The strength of the economy could add to the debate over whether Taiwan's central bank should resume raising interest rates in December, after keeping its benchmark unchanged for 10 consecutive quarters. 

Economists at Goldman Sachs Group Inc. recently revised their monetary policy call from “an extended hold” and now see a rate hike cycle starting in December 2026.

“Robust growth gives the central bank room to focus on inflation,” said Raymond Yeung, chief Economist for Greater China at Australia & New Zealand Banking Group Limited. “A potential reversal in the AI investment boom poses a key downside risk, although this is not our base case and the timing of any downturn remains highly uncertain.”

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

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