AI-led growth continues to power exports and investment, while the central bank says traditional manufacturers are weathering a K-shaped recovery better than peers in Japan and South Korea.
Taiwan’s June economic monitoring signal remained at a red light, with the National Development Council reporting a composite score of 41, up 2 points from the previous month. The result marked a seventh straight month in the booming range as AI demand continued to support exports, investment and factory activity, and officials said second-half momentum should hold. The Central Bank, in a report prepared for a Legislative Yuan Finance Committee hearing on the K-shaped economy, said the restructuring of global supply chains after 2018 and demand for AI and other emerging technologies have strengthened global reliance on Taiwan’s electronics and ICT manufacturing sector, while traditional industries have faced pressure from low-price dumping by China and U.S. tariff policies. Even so, it said Taiwan’s traditional manufacturers have held up relatively better than counterparts in Japan and South Korea because many have pursued higher-value transformation, raised value-added ratios and in some cases moved into the electronics and ICT supply chain. The central bank said it would continue to use tools including open market operations to keep market liquidity ample and support corporate transformation and investment alongside government industrial programs. It forecast Taiwan’s Consumer Price Index growth at 1.93% this year, and said the average forecast from nearly 20 major domestic and international institutions puts 2027 inflation at about 1.8%, suggesting inflation expectations remain stable if international oil prices ease. NDC Department of Economic Development Director Chen Mei-chu said June’s strength was still primarily driven by AI demand. The manufacturing sales index turned from yellow-red to red, while overtime hours in industrial and service sectors moved from green to yellow-red. Chen said AI demand for chips and servers has also spilled over into machinery and basic metals, while the Dragon Boat Festival, World Cup events and graduation season supported retail and food and beverage activity. Chen also said leading indicators showed some improvement for traditional industries. Machine tool orders have begun to emerge, with some manufacturers seeing visibility extending into the third quarter or year-end, helped by China’s stricter export controls on material processing devices such as multi-axis CNC lathes and milling machines. She also said U.S. Section 301 tariff measures on forced labor left Taiwan facing a 10% tariff rate that is not stacked on top of Most-Favored-Nation rates, improving export conditions for traditional manufacturers. Domestic institutions including Academia Sinica and the Taiwan Institute of Economic Research still estimate Taiwan’s economic growth in the second half of the year will exceed 8%.