Morgan Stanley Raises Taiwan’s 2026 Growth Forecast as AI Boom Accelerates

Morgan Stanley has dramatically raised its economic growth forecast for Taiwan, projecting that gross domestic product will expand 11.6 percent in 2026 as strong demand for artificial intelligence (AI) and semiconductors spreads into investment, services, and consumer spending.

The investment firm previously expected growth of 8.9 percent this year. It also raised its 2027 forecast from 4.7 percent to 7.5 percent, according to an Aug. 26 report cited by Taiwan’s Central News Agency. If realized, the 2026 expansion would be Taiwan’s strongest in nearly four decades.

Official data show Taiwan’s economy grew 15.43 percent year over year in the first quarter and 12.92 percent in the second, bringing average first-half growth to 14.15 percent, well above earlier expectations.

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AI boom spreads beyond exports

Morgan Stanley attributed the upgrade to three main factors: Continued growth in technology exports driven by global AI demand, increased capital spending by semiconductor companies and related suppliers, and an improvement in consumer spending supported by recovering service industries and government policy.

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The bank said Taiwan’s economy is becoming less dependent on net exports alone, with domestic investment and consumption contributing more to overall growth as the benefits of the AI and semiconductor boom spread across the wider economy.

Taiwan’s trade figures reflect that momentum. Exports totaled USD$75.3 billion in July, up 32.9 percent from a year earlier and marking the 33rd consecutive month of annual growth. During the first seven months of 2026, exports rose 44.7 percent year over year to USD$491.95 billion, according to Taiwan’s Ministry of Finance.

Export orders reached a record USD$97.94 billion in July, surging 61.9 percent from a year earlier. Information and communications technology products and electronic products were among the strongest categories, driven largely by continued demand for AI-related hardware.

Morgan Stanley expects Taiwan’s exports to grow 20.7 percent for the full year. Shipment growth could slow from about 28 percent in the first half to roughly 13 percent in the second, though the bank said the moderation largely reflects tougher year-earlier comparisons and shipment timing rather than a clear downturn in the semiconductor cycle.

The report said semiconductor export-volume growth may already have peaked at the end of 2025, but rising advanced-chip content and value, combined with continued global AI investment, should keep technology exports resilient.

Growth brings inflation risks

The firm expects Taiwan’s consumer price index to rise 2.1 percent in 2026 and 2.2 percent in 2027, leaving both headline and core inflation slightly above the central bank’s 2 percent reference level. The bank cited fuel prices, weather-related food costs, rising technology-product prices, stronger consumption, and higher wage expectations as potential sources of inflationary pressure.

It also noted that Taiwan’s government is considering another NT$10,000 cash payment per person in 2027. If approved, Morgan Stanley estimates the measure could add roughly 0.3 percentage points to economic growth next year, while also increasing demand-side inflation pressure.

Other international banks have also pointed to Taiwan’s increasingly important role in the global AI economy. HSBC has described Taiwan as one of its fastest-growing markets, citing the semiconductor sector, rising AI investment, expanding cross-border trade, and growing wealth creation.

“The advantage that Taiwan has is a growth story linked to the semiconductor and broader AI industries, strong underlying corporate performance, and wealth creation,” Surendra Rosha, HSBC’s co-chief executive for Asia and the Middle East, told the Taipei Times.