Taiwan’s economy expanded at its fastest pace in nearly 39 years thanks to robust demand for artificial intelligence technology, data showed on Thursday, despite worries about the Middle East crisis.
The island is a global powerhouse in the production of semiconductor chips that power artificial intelligence, and its economy has grown rapidly in recent years.
But the Iran war has raised concerns about the potential impact on the economy, particularly in the critical chip sector, because of Taiwan’s near-total reliance on energy imports to keep the lights on and production lines running.
Gross domestic product expanded by an annualized 13.7 percent in the first quarter of 2026, the fastest pace since the second quarter of 1987, according to the statistics agency.
It was also better than the 11.3 percent forecast in a Bloomberg News poll and an increase from the 12.7 percent recorded in the previous three months.
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“The rapid expansion of AI applications has significantly increased demand for computing power, which in turn has fueled strong export momentum for products in supply chains related to AI infrastructure,” said Chiang Hsin-yi, an official at the General Directorate of Budget, Accounting and Statistics.
She added that the impact from the war in the Middle East “doesn’t seem so obvious at this point”, although some data for the month of March “is not yet so complete”.
Taipei has sought to limit the economic impact of the Iran war by absorbing much of the rise in fuel prices while also ensuring the island has a secure supply of LNG and oil, much of which comes from the Middle East.
Wendell Huang, chief financial officer of chipmaker TSMC, said this month that the company did not expect the war to affect its supply of key chipmaking materials such as helium and hydrogen in the near term.
TSMC is the largest contract manufacturer of microchips used in everything from the Apple iPhone to Nvidia processors.
However, “Taiwan’s consumption likely slowed” and “investment probably fell” in the first quarter as sentiment was hurt by the conflict, Bloomberg reported ahead of the data release.
The export-led economy grew 8.6 percent in 2025, its fastest pace in 15 years, but is expected to expand 3.5 percent this year.
