(Bloomberg) -- Taiwan sees the economy growing at the fastest pace since 2021 this year as officials upgraded their forecasts, citing a rebound in global trade and surging demand for artificial intelligence technologies.  

Gross domestic product is likely to expand 3.94% this year, Taiwan’s statistics bureau said in a statement Thursday, up from their most recent forecast of 3.43%. Officials said the improved forecast was down to increased government and corporate investment in AI and cloud computing as well as an expected overall improvement in global exports. 

GDP in the first quarter grew 6.56%, more than the 6.5% estimate in a Bloomberg survey of economists. Officials see Taiwan’s exports expanding 10% this year, up from their previous forecast of 6.14%.

Government concerns over stubbornly high inflation appear set to continue, with the statistics bureau raising their outlook for inflation to 2.07% from their previous forecast of 1.85%. The worries over inflation stem from the fact it has outpaced wage growth over much of the past three years, eroding real incomes for households across the island.

Inflation outpaced average regular wage growth in Taiwan in two of this year’s first three months. Inflation either outpaced or equaled wage gains in 10 months of last year.

The increase in the government’s outlook for inflation is mainly down to higher prices in the services sector, with the cost of eating out, rents and medical bills all rising significantly, the statistics bureau’s director general, Chen Shu-tzu, said at a briefing in Taipei Thursday.

Frustration over cost-of-living issues is one of the top challenges facing newly inaugurated President Lai Ching-te, who won election in January with just 40.1% of the popular vote. His Democratic Progressive Party also lost control of the legislature, underlining Taiwan’s political divide.

In response to public angst over the issue, Lai has promised to bolster wages and to support small and medium-sized business so as to better distribute the benefits of economic growth.

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