ING Think taiwans double digit gdp growth continued in the second quarter

THINK economic and financial analysis

Taiwan’s double-digit GDP growth extends into the second quarter Taiwan's GDP growth continued its blistering growth at 12.9% year-on- year, once again beating the entire slate of market forecasts

A surprise boost from domestic demand has contributed to Taiwan's continued outperformance

12.92% YoY Taiwan's 2Q26 GDP growth Higher than expected

Taiwan sees third straight quarter of double-digit growth Taiwan's second-quarter GDP came in at 12.92% YoY, moderating slightly from 14.55%. Nonetheless, it has once again beaten the entire slate of market forecasts, including our own top-of-the-market forecast (market: 10.5%, ING: 12.1%).

The biggest surprise was that domestic demand actually contributed more to growth than net exports. Domestic demand added 7.00ppt to 2Q26 growth, thanks to a significant boost from gross capital formation (4.03ppt), as well as a strong read from private final consumption

THINK economic and financial analysis

Taiwan's capital expenditure cycle, much like the rest of the world, is being driven by the AI infrastructure boom.

Amid strong equity market performance in the first half of the year, Taiwan's consumption may have also been supported by positive wealth effects. Categories performing well included information and communication, entertainment, transport, and outbound tourism.

Net exports were still a major contributor, adding 5.93ppt to 2Q26 growth. Taiwan's exports continue to surge so far this year; they were up 47.1% YoY in the first half of the year, while imports have also risen 40.3% YoY in the same timeframe, thanks to higher tech input and energy prices.

So, with Taiwan's GDP surpassing the entire field of forecasts as its economic growth continues to surge, the key question remains how long this can last. With the recent tech sell-off in equity markets causing jitters, questions about how long the tech capital expenditure cycle will continue, and increasingly challenging base effects likely to start cutting into growth in the fourth quarter, this is a very reasonable question to ask.

Our view is that this year, at least, is still going to look quite strong. Export orders continue to show strong momentum, and if the stronger-than-expected domestic demand side holds, it is a potent combination for further outperformance. We'll likely see growth moderate in the second half, but there are no signs of a significant slowdown. Upcoming inflation data should determine whether the Central Bank of the Republic of China (CBC) will hike this year, but a single 12.5bp rate hike in either September or December doesn't seem likely to significantly drag growth.

Moving forward, Taiwan's economic outlook remains firmly anchored to the trajectory of the AI boom, with its economy seeing one of the world's biggest boosts to growth due to its central role in the semiconductor supply chain. Economists have been repeatedly revising up forecasts over the past year, and once again it seems we are still not sufficiently bullish. We'll take one more chance, revising our 2026 full-year forecast to 11.1% YoY, up from 10.1% YoY previously.