Taiwan Institute of Economic Research Forecasts 2021 GDP Growth at 10.38%: Strong Domestic and External Demand Drive Upward Revision

The Taiwan Institute of Economic Research (TIER) announced today (24) its latest forecast for Taiwan's 2021 economic growth rate (GDP) at 10.38%, an upward revision of 2.82 percentage points from its April projection. This not only aligns with optimistic forecasts from the Chung-Hua Institution for Economic Research and the Institute of Economics at Academia Sinica—both predicting growth exceeding 10%—but also represents the highest GDP forecast among all think tanks. TIER emphasized that unlike last year, when GDP growth was primarily driven by external demand, this year's growth is being propelled by simultaneous expansion in exports, investment, and private consumption, resulting in a more balanced economic structure supported by both domestic and external demand.

TIER forecasts private consumption growth at 3.73% for 2021, up 1.13 percentage points from the previous estimate, and private investment growth at 7.09%, up 2.67 percentage points. Export and import growth rates are projected at 21.24% and 18.96% respectively, revised upward by 5.5 and 5.63 percentage points.

On inflation, TIER expects Taiwan's Consumer Price Index (CPI) to rise 1.98% year-on-year for the full year, up 0.09 percentage points from its prior forecast. This adjustment follows renewed disruptions to the Middle East ceasefire agreement in July, which triggered a sharp rebound in international oil prices and sustained volatility in energy markets. However, the projected CPI remains within the Central Bank of Taiwan's 2% inflation alert threshold.

TIER further explained that robust demand for AI, high-performance computing, and cloud applications has led to stronger-than-expected performance in electronics and ICT product exports, production, and overseas sales. Additionally, stable employment, rising wages and cash dividends, and the wealth effect from a strong stock market performance in the first half of the year have further boosted private consumption.

At the same time, continued capacity expansion in advanced semiconductor processes and high-end production, along with increased investments by major international tech firms in Taiwan, have strengthened momentum in both domestic and external demand as well as investment.

Looking ahead to the second half of the year, TIER anticipates that economic growth may moderate compared to the first half. However, resilient demand for AI, high-speed computing, and electronic ICT products is expected to continue driving exports, equipment investment, and R&D spending. Domestic demand is projected to become a key pillar supporting economic momentum.

Nonetheless, TIER cautioned that the high uncertainty surrounding the Middle East situation remains a major downside risk when assessing the global economic outlook for the second half. Additionally, the sustainability of the AI investment boom could affect corporate investment confidence and private consumption through financial market volatility, warranting careful monitoring of future developments.