By Sherry Qin
Taiwan's economy expanded at its fastest speed in 39 years, supercharged by demand tied to artificial intelligence, despite lingering risks from the Middle East conflict threatening to halt that momentum.
Gross domestic product expanded 13.69% in the January-March quarter from a year earlier, advance estimates showed Thursday. That beat the 11.3% growth expected in a Wall Street Journal poll and marked its highest level since 1987.
Exports of goods and services rose 35.25% in the first quarter, supported by AI demand.
AI has provided a buffer for tech-heavy economies, especially as the AI buildout increasingly relies on physical infrastructure from Asia, including chips, memory, advanced packaging, power and data centers.
Taiwan plays a critical role in the AI supply chain, with the world's largest contract chip maker Taiwan Semiconductor Manufacturing Co. counting Nvidia and Apple as its clients.
Meanwhile, Capital Economics' Gareth Leather thinks there are signs that strong export growth is finally starting to filter through to the rest of the economy, as real private consumption rose 4.9%.
Capital Economics raised its 2026 growth forecast for Taiwan to 9.0% from 8.0% following Thursday's stronger-than-expected figures.
Despite the strong first-quarter reading, fallout from the war in the Middle East threatens to curb Taiwan's growth in the months ahead. Higher energy prices could stoke inflation, and rising costs for other industry-critical inputs pose a challenge too.
Taiwan relies heavily on fuel imports, with about 37% of its liquefied natural gas supply linked to Middle East routes via the Strait of Hormuz, according to Goldman Sachs. Shipping through the passage has been largely halted due to the U.S.-Israel war with Iran.
Taiwan state-owned energy group CPC has helped secure supplies during the crisis and stabilize oil and natural-gas prices. It has absorbed recent increases in gasoline and diesel prices, keeping natural gas and electricity prices unchanged in April.
Persistently high energy prices could weigh on Taiwan's chip makers, which powered the economy to multiyear highs in 2025. TSMC accounts for about 10% of the island's electricity use, according to Barclays economists.
Other supply-chain disruptions also present a challenge for the chip industry.
Helium, a byproduct of natural gas, is critical to semiconductor manufacturing because of its cooling properties.
A combination of the strait's closure, shut-ins and damage to Qatar's natural gas infrastructure has curtailed around one-third of global helium capacity, according to HSBC economists.
The HSBC economists view economies such as Taiwan, South Korea and China as most exposed to shortages of the gas most widely associated with party balloons.
So far, downstream impact has been limited because chip makers have some helium inventory buffers, and the gas accounts for only about 2% of wafer costs, HSBC's Paul Bloxham and Jamie Culling said in a report.
But the longer the strait remains closed, the more likely it is that the helium supply squeeze will morph from a cost pressure issue into a genuine capacity constraint, they said.
Write to Sherry Qin at sherry.qin@wsj.com
(END) Dow Jones Newswires
April 30, 2026 05:00 ET (09:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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