AI Super Cycle Peaking in Q3? DBS Forecasts Taiwan's Economy to Surpass $1 Trillion, GDP Growth of 9.4% Leading Asia

DBS Bank today (16th) released its third-quarter economic outlook, stating that the global AI industry is at the peak of a supercycle and will transition from explosive growth to stable and sustainable expansion. Although AI momentum is normalizing, DBS maintains its robust forecast of 9.4% GDP growth for Taiwan this year, projecting that Taiwan’s economic scale will surpass the $1 trillion mark for the first time, with per capita GDP reaching $40,000, firmly securing its position as Asia’s top growth leader. Supported by stock market wealth effects and a resilient labor market, domestic consumption remains strong, underpinning Taiwan’s shift toward a more sustainable growth trajectory.

DBS senior economist Ma Tieying pointed out that through a three-layer monitoring system for the AI economic cycle, while U.S. information and communication technology investment as a share of GDP has surpassed the peak of the 1990s internet bubble, this is largely driven by rising chip prices. In terms of volume, Taiwan’s semiconductor shipments peaked in the first quarter and have slightly declined. Additionally, the large model Token index dropped by 20% in May, indicating signs of normalization in AI expansion momentum. The commercialization and profitability of AI still require market validation, and with rising global funding costs and constraints in power and land supply, AI-related spending is expected to become more cautious in the second half of the year.

On the macroeconomic front, Ma analyzed that with geopolitical risks persisting, oil prices are expected to remain around $80 per barrel, and upward pressure on raw material costs in the first half will continue to transmit. Inflation across countries remains moderately high. Regarding monetary policy, the Federal Reserve currently faces no urgent pressure to cut rates and will continue monitoring real interest rates and employment data in the second half. Taiwan’s consumer price index (CPI) year-on-year growth forecast has been slightly revised up from 1.9% to 2.0%, with inflation expected to remain under control at around 2% in the second half. Gradual stabilization of private consumption and the housing market will serve as key pillars supporting the economy.

The AI wave is accelerating global supply chain restructuring and promoting the formation of the Taiwan-Singapore economic corridor. As AI and semiconductor specialization deepens, bilateral trade between Taiwan and Singapore is expected to exceed $100 billion this year, with Taiwan already becoming Singapore’s largest trading partner. Trade is highly concentrated in electronic components and precision machinery, reflecting the tight integration of both countries in the high-tech supply chain. Leveraging its logistics infrastructure, free trade environment, and tax system, Singapore has become a crucial hub for Taiwanese companies’ supply chain management and regional operations. With the advancement of the Johor-Singapore Special Economic Zone, ample land and energy supply will further boost demand for Taiwan’s high-tech products such as AI servers and semiconductors.

Looking ahead, Taiwan continues to lead in advanced process technology, high-bandwidth memory, and advanced packaging, complementing Singapore in the semiconductor supply chain. Cooperation between the two countries in semiconductor manufacturing and equipment is deepening. Ma stated that by 2026, Singapore is expected to become Taiwan’s fourth-largest trading partner, behind only the U.S., mainland China, and South Korea. When measured by individual country, Singapore is projected to become Taiwan’s largest source of foreign direct investment (FDI) this year and the second-largest overseas investment destination after the U.S. Taiwan and Singapore are building a more resilient global production network within the global high-tech industrial division.