Taipei: Switzerland-based banking group UBS has raised its forecast for Taiwan's 2026 gross domestic product (GDP) growth to 9.9 percent, up from an earlier estimate of 8 percent made in April.

According to Focus Taiwan, William Deng, a UBS senior economist for Asia, stated that Taiwan's economy is expected to grow at a double-digit pace "with ease" in the second quarter, driven by strong exports. The economy had already seen a 14.5 percent growth rate in the first quarter. Following an initial moderation post-oil shock in March, Taiwan's manufacturing purchasing managers' index (PMI) improved in April and May, reaching a recent high of 56.1. This performance significantly outshone other emerging markets globally.

Another supportive element for Taiwan's economic outlook is the recently signed memorandum of understanding between the United States and Iran to end military operations in their conflict. This development is expected to reduce geopolitical uncertainties, according to Deng. UBS's latest projection surpasses the current consensus of 9.2 percent for Taiwan's GDP growth in 2026.

Before the latest revision, UBS had previously upgraded its GDP growth forecast for Taiwan to 8 percent in April, from an estimate of 6.9 percent made in February. UBS's stance appears slightly more optimistic than Taiwan's government, with the Directorate General of Budget, Accounting and Statistics (DGBAS) forecasting a 9.64 percent growth for the year.

Exports have been a pivotal factor in Taiwan's economic expansion, accounting for 69.5 percent of the GDP in 2025. In the first five months of 2026 alone, exports surged by 48.7 percent year-over-year, following a 34.9 percent increase in 2025. The export of AI-related servers and semiconductors, crucial for building AI infrastructure in the United States, has played a significant role in boosting outbound sales.

Regarding inflation, UBS does not anticipate it will significantly impact Taiwan for the remainder of the year. Although the consumer price index (CPI) rose by 2.2 percent in May, this was primarily due to a spike in energy prices linked to geopolitical tensions in the Middle East and remained mild compared to other regional economies. UBS projects Taiwan's CPI to grow by 1.9 percent in 2026, slightly lower than the DGBAS forecast of 1.93 percent. Deng noted that Taiwan's inflation outlook remains moderate with manageable inflationary risks.

Taiwan's central bank decided to keep key interest rates unchanged in their recent quarterly meeting, maintaining this stance for the ninth consecutive quarter. The decision aligns with the relatively mild domestic inflationary pressures and aims to support steady economic growth and financial market stability. The central bank also projects a 1.91 percent growth in the local CPI for 2026, up from a March estimate of 1.80 percent.

UBS maintains the perspective that Taiwan's central bank will continue to keep interest rates steady, citing effective inflation management by the government, modest domestic loan growth, and overall moderate changes in housing prices.