Bank of America has raised its forecast for Taiwan's real GDP growth in 2026 to 8%, up from a prior estimate of 4.5%, citing what its economists described as a "blowout surge in 4Q25 export-led growth." The bank's team framed the change not as a temporary mark-to-market tweak but as a reflection of sustained confidence in Taiwan's technology-driven expansion.
Analysts at the bank highlighted several factors supporting the revised outlook: a more stable currency, the U.S.-Taiwan trade agreement, and aggressive capital expenditure plans among major technology companies. They expect demand related to artificial intelligence to remain the primary growth engine through 2026.
BofA projects another year of double-digit export growth in 2026, although it sees that pace moderating from the exceptionally strong levels seen in 2025 as segments such as consumer electronics and non-tech categories stay soft. The bank's economists point to a narrow set of goods that is currently driving most of the expansion.
According to their analysis, information and communications products, electronic components and machinery together make up roughly 80% of Taiwan's exports and account for nearly all of the recent growth. The share of information and communications products in total exports has risen sharply - from 13% to 39% over a three-year span - a shift BofA links to Taiwan's dominant role in producing the world's AI servers, where it supplies more than 90% globally.
"Meanwhile, machinery and equipment investment should continue to underpin capex, even as the real-estate market cools," the economists added.
On the domestic demand side, private consumption surprised to the upside in the fourth quarter. While BofA's team acknowledged that part of that strength likely reflected temporary factors, they noted that a sustained rebound in household spending could help broaden growth beyond the AI-linked sectors that are currently leading the expansion.
Reflecting the stronger growth outlook, BofA lifted its inflation projections to 1.6% for 2026 and 2.0% for 2027, up from previous forecasts of 1.3% and 1.7%, respectively.
Despite upgrading the growth view, the bank's economists do not expect Taiwan's central bank to raise policy rates in the near term. Their assessment rests on contained inflation, weakness in non-technology sectors and a cooling property market. BofA now anticipates two rate increases of 12.5 basis points each in the first half of 2027.
"A meaningful shock in inflation or property conditions could bring forward a more hawkish stance, while a deeper downturn in non-tech sectors would likely keep the central bank cautious for longer," the economists wrote.
BofA described the balance of risks to its outlook as roughly even. It identified global AI capital expenditure trends, currency movements and geopolitical developments as the principal external uncertainties that could alter the trajectory. Domestically, the bank emphasized the importance of policy choices in the context of what it termed an increasingly K-shaped economy, where widening divergences between sectors could magnify macroeconomic risks and complicate policy trade-offs.
Key points
- BofA raised Taiwan's 2026 GDP forecast to 8% from 4.5%, driven by a strong export surge in 4Q25.
- AI-related demand is expected to remain the central growth driver, with information and communications products, electronic components and machinery making up about 80% of exports.
- Inflation forecasts were increased to 1.6% in 2026 and 2.0% in 2027; monetary policy is expected to stay on hold near term, with two modest hikes penciled in for early 2027.
Risks and uncertainties
- Global AI capex trends could materially alter export momentum and investment plans, affecting technology-related sectors and export volumes.
- Currency moves present an external risk that can influence export competitiveness and inflation dynamics.
- Geopolitical developments and widening domestic sector divergence in a K-shaped pattern could increase macro risks and complicate policy decisions, particularly for non-tech sectors and the property market.
This analysis highlights the concentrated nature of Taiwan's near-term expansion: exports tied to AI and related technology investment are powering much of the upgrade, while non-technology sectors and property cooling remain a constraint on broader-based strength.