Higher energy costs reshape outlook – Standard Chartered

Standard Chartered‘s Senior Economist Tommy Wu revises Taiwan’s 2026 macro outlook as higher Oil and LNG prices from Middle East tensions lift import costs. The bank now sees CPI inflation at 2.1% instead of 1.5%, and trims GDP growth to 7.6% from 8.0%. CBC is expected to keep rates at 2.0%, with a conditional risk of a June hike.

Oil shock lifts CPI and trims growth

“We raise our 2026 headline CPI inflation forecast to 2.1% (from 1.5%) to reflect the impact of higher oil and LNG prices due to the Middle East conflict. The governments price stabilisation mechanism should reduce the pass-through to CPI inflation significantly.”

“However, rising costs and supply disruption of certain industrial and agricultural inputs, and imported inflation more generally would eventually be passed through to consumer prices. For now, we expect the rise in inflation to be temporary, but this would depend on the duration and the intensity of the conflict.”

“We also trim our 2026 GDP growth forecast to 7.6% (from 8.0%). We expect the surge in global energy and industrial input prices to result in softer global demand, dampening Taiwans exports.”

“Demand for consumer electronics could be affected more visibly. AI-related demand may not be significantly affected for now, but a prolonged surge in energy costs could become a material headwind to AI investment and demand for Taiwans semiconductors.”

“Given our base case that the rise in inflation will probably be temporary, we maintain our view that the Taiwan Central Bank (CBC) will keep the policy rate at 2.0% for the rest of this year. However, should oil prices move sharply higher in the coming weeks, we would not rule out the next rate hike coming as early as June.”