TAIPEI (Taiwan News) — Taiwan’s manufacturing index climbed for the second straight month in August, boosting optimism that GDP growth could reach 5% this year, Taiwan Institute of Economic Research said Thursday.

TIER reported the manufacturing business climate index rose to 88.88 points in August, up 1.79 points from July, per CNA. The institute said easing pressures from tariffs, exchange rates, and China’s overcapacity have steadied manufacturers’ outlooks, while AI demand continues to drive growth.

TIER Macroeconomic Forecasting Center Director Sun Ming-te (孫明德) explained that manufacturers struggled earlier this year under US tariffs, a strong Taiwan dollar, and China’s overcapacity. However, with Washington’s tariff policies clearer and the Taiwan dollar weaker, confidence has improved.

TIER President Chang Chien-yi (張建一) said AI demand and a planned NT$10,000 (US$330) cash handout will fuel both exports and domestic consumption. He expects growth above 4.5% and sees a chance of hitting 5%, higher than government forecasts.

Chang noted Taiwan stocks breaking past the 26,000 mark, with TSMC and other AI-related shares leading the rally. He cautioned that sector performance is uneven, with tech strong but traditional industries weak, while Taiwan’s growing trade surplus with the US could complicate negotiations.

The think tank also released data showing services at 88.64 points in August, up 1.01, and construction at 97.41, up 2.66. TIER Taiwan Industry Economics Database researcher Liu Pei-chen (劉佩真) said the housing market remains sluggish, with falling transaction volumes and prices likely to persist for the next six months.