Taiwan

Taiwan has recorded robust GDP growth over the past decades, with an average annual rate of +3.9% in the 2000s and +3.6% in the 2010s. Even during the years of the pandemic, the economy showed remarkable resilience, recording growth of +3.4% in 2020, +6.6% in 2021 and +2.6% in 2022, broadly outpacing the Asia-Pacific region. In addition to effective containment strategies and swift policy action, the economy’s competitiveness in terms of manufacturing, notably of semiconductors, can be attributed to its resilience. Moreover, on the back of a recovery in global demand, a rebound in the electronics cycle and the AI-related supply chain, GDP growth in Taiwan is estimated to have increased from an already robust +4.8% in 2024 to +7.1% in 2025. Some normalization is expected thereafter, with growth likely settling to +3.3% in 2026 and +2.3% in 2027. Additionally, protectionist US trade policies and endeavors from the US and China to develop their own chip production pose downside risks to Taiwan’s economic outlook. After declining by -20% in 2024, business insolvencies should have reduced by another -6% in 2025. In the short-term, we expect them to slightly rise by +4% in 2026 and 2027.

Fiscal policy in Taiwan is healthy and has been broadly accommodative in recent years. The annual fiscal deficit came in at -2.9% of GDP in 2020, before stabilizing at around -2% of GDP in 2021 to 2024. It reduced to an estimated -0.3% in 2025 and the fiscal balance should remain around 0% until 2027, on the back of softer government expenditure and increases in tax enforcement, reflecting attempts to impose fiscal discipline in the line of the Fiscal Discipline Act.

After a few years of relatively high inflation compared to historical levels, with +3% in 2022, +2.5% in 2023 and +2.2% in 2024, headline inflation slowed moderately to +1.7% in 2025. After a tightening of domestic monetary policy between 2022 and 2024, the Central Bank of the Republic of China (CBC) maintained its discount rate at 2% throughout 2025. Despite subdued forecasted inflation of +1.1% in 2026 and +1.4% in 2027, we expect the discount rate to remain unchanged throughout 2026.

Taiwan has a solid business environment with well-developed physical infrastructure, an educated workforce and business-friendly policies. The Heritage Foundation’s annual Index of Economic Freedom surveys have put Taiwan in the top 10 out of 185 economies in recent years (rank 4 in 2025), reflecting very strong scores with regards to judicial effectiveness, fiscal health, government spending, trade, business and monetary freedom, property rights and tax burden. Indicators that have the potential to improve further include those related to financial, labor and investment freedom and government integrity (the latter having slightly deteriorated). Likewise, the World Bank Institute’s annual Worldwide Governance Indicators 2024 survey suggests that the regulatory and legal frameworks are business-friendly with a low level of corruption. On the downside, Taiwan ranks 193 out of 210 economies in our proprietary Environmental Sustainability Index, due to a relatively low energy use per GDP indicator and renewable energy output, while recycling rate and CO2 emissions stay moderate.