Taiwan’s manufacturing, services, and construction industries all posted stronger business climate indicators in August, raising hopes among economists that the economy could grow by as much as 5% this year.

The Taiwan Institute of Economic Research (TIER) on Thursday reported that its August 2025 manufacturing climate index rose 1.79 points to 88.88, marking a second straight increase. The services index climbed 1.01 points to 88.64, while construction jumped 2.66 points to 97.41.

TIER Macroeconomic Forecasting Center Director Sun Ming-te (孫明德) said that with the United States tariff policy now largely priced in, and the Taiwan dollar weakening in August, the shocks from trade and currency have eased in recent months. He added that China has also begun rolling out measures to address overcapacity and “involution,” boosting confidence among manufacturers. This, he said, could support the outlook for the next four months and into 2026.

TIER Director Chang Chien-yi (張建一) noted that artificial intelligence has performed better than expected, while both the Directorate-General of Budget, Accounting and Statistics and the central bank now forecast GDP growth of at least 4% this year. He added that a NT$10,000 (US$329) cash handout to the public will further stimulate domestic demand.

Still, Chang cautioned that sector performance remains uneven. Traditional industries are relatively weaker, pressured by U.S. tariffs, sluggish European demand, and low-priced Chinese dumping. While the government can provide short-term support, he stressed that in the longer run, companies must continue upgrading and transforming.