Standard Chartered raised Taiwan’s 2026 growth forecast to 9.5% from 7.6% after stronger-than-expected first-quarter GDP data. An advance estimate put Q1 GDP growth at 13.7% year on year and 2.8% quarter on quarter, the fastest pace since 1987.
AI-related demand and strong exports are cited as key drivers of the outlook. Private consumption is supported by government cash handouts and rising equity prices linked to the technology sector.
Drivers Of The Growth Upgrade
Growth is expected to cool in the second half of the year on a year-on-year basis, due to base effects weighing on exports and GDP, especially in Q4. The central bank is expected to keep the policy rate at 2% this year, while inflation risks are seen as higher due to stronger domestic demand.
We see the updated 9.5% growth forecast as a clear signal to maintain a bullish stance on Taiwanese assets. The massive surprise in Q1 GDP growth, the fastest since 1987, confirms the AI supercycle is translating into real economic power. In the coming weeks, this supports strategies that benefit from a rising market, such as buying call options on the TAIEX index.
This positive outlook is already reflected in the market, with the TAIEX having surged over 25% year-to-date to break the 31,000 mark. This has been largely driven by semiconductor leaders, whose export orders in April, released just yesterday, showed a 19% year-over-year increase. We saw a similar, though less pronounced, pattern during the 5G rollout boom in 2020, which preceded a multi-year rally.
The strong export growth should continue to support the Taiwan dollar, which has already appreciated past the key 29.5 level against the U.S. dollar. After the broad tech correction we saw in 2025, this strength is a sign of fundamental demand. Traders could use currency futures or options to position for further appreciation, though the central bank may act to slow a rapid ascent.
Managing Second Half Risk
However, we must be mindful of the expected slowdown in growth during the second half of this year. The high base effects from the strong performance in late 2025 mean that year-over-year comparisons will become less dramatic. This suggests that while near-term bullish positions are warranted, traders should consider using options with expirations in the third quarter rather than holding long futures contracts into the fourth.
With the central bank likely keeping its policy rate unchanged at 2%, we do not anticipate major opportunities in interest rate derivatives. This stability is good for equities but means volatility may be lower in the bond market. The recent CPI inflation reading of 2.8% is nearing the bank’s comfort zone, but not yet high enough to force a policy change.
