AI-driven growth continues to power Taiwan’s economy, prompting DBS Bank Ltd to raise its 2024 GDP forecast to 5.6 percent. The bank cited stronger-than-expected exports and investments tied to artificial intelligence and information technology as key factors behind this surge.
Economist Ma Tieying from DBS Bank said Taiwan’s economy outperformed expectations in the third quarter, thanks to booming demand for AI-related hardware and components. The nation’s information and electronics manufacturing sector contributed most of the growth in the first half of the year, helping the economy expand by 6.7 percent year-on-year.
However, despite strong AI-driven growth, recent data suggests the sector’s expansion is starting to slow. Exports of electronic components rose 25.6 percent year-on-year in September, down from August’s 34.6 percent rise. Meanwhile, information and communications technology exports climbed 86.9 percent, easing from a peak of 111.1 percent in May.
Taiwan’s manufacturing sentiment has also cooled. The purchasing managers’ index remained below 50 for three straight months, signaling a mild contraction. DBS expects export and investment growth to moderate from this quarter onward as AI-driven growth peaks and new U.S. tariffs begin to pressure external demand.
Outside the tech sector, other industries face growing headwinds. Non-ICT exports have weakened under U.S. reciprocal tariffs and reduced Chinese demand. Domestic consumption remains sluggish, while a softer labor market and rising furlough numbers add further strain.
In addition, Taiwan’s construction sector is slowing amid a cooling real estate market. Real-estate loans now make up 36.7 percent of total bank lending, exceeding the central bank’s preferred range and limiting room for monetary easing.
Rising U.S.-China trade tensions add further uncertainty. China recently tightened controls on rare earth exports, while Washington is considering new tariffs on Chinese goods. These materials are critical to semiconductor production and data center operations, making any supply disruptions costly for global technology chains.
To mitigate risks, Taiwan’s government is pursuing closer industrial cooperation with the United States. Initiatives include developing technology clusters, strengthening infrastructure, and offering investment guarantees to ensure competitiveness in semiconductor and AI-related sectors.
Despite near-term challenges, analysts believe Taiwan’s innovation capacity and integration into global supply chains will sustain its long-term growth momentum.
