J.P. Morgan: Asia’s growth momentum broadens: Taiwan investment and South Korean industry rebound as central bank tightening paths diverge

Why did Asian growth accelerate at the end of the third quarter?

Taiwan’s seasonally adjusted GDP grew at an annualized rate of 13.5% quarter on quarter in the third quarter of 2026, well above expectations and the second quarter’s 5.7%. AI demand supported exports, while technology companies increased domestic investment to meet sustained external demand, making investment an important contributor to third-quarter growth.
South Korea’s seasonally adjusted industrial production rose 9% month on month in September, exceeding market consensus and JPMorgan’s own forecast and more than offsetting the contraction in August. The rebound spanned both technology and non-technology industries.
South Korea’s third-quarter GDP growth was slightly below JPMorgan’s forecast but clearly above the Bank of Korea’s and market consensus forecasts. The September industrial data prompted the bank to raise its fourth-quarter GDP growth forecast to 4.5% on a quarter-on-quarter annualized basis; it also believes the third-quarter figure may subsequently be revised upward.

JPMorgan attributed weak industrial production in South Korea and Japan in August to one-off supply disruptions and believes the rebound in both economies in September supports that assessment. Alongside strong exports, non-technology exports and domestic investment are also adding to growth momentum.
The emerging Asian economies tracked by the bank, excluding China and India, grew at a quarter-on-quarter annualized rate of 5.2% in the third quarter, above trend and echoing strong growth in the first half; however, it expects growth on this measure to slow to 4.2% in the fourth quarter.

JPMorgan believes differences in the technology cycle, domestic demand, energy-price pass-through and financial stability risks are leading central banks to tighten at different speeds. The Philippine central bank recently surprised markets with a 50-basis-point rate hike, reflecting stronger energy-price pass-through from the rebound in oil prices; Indonesia’s central bank held rates steady, but JPMorgan expects it to continue raising rates over the coming months to counter exchange-rate pressure.
Thailand’s central bank kept its policy rate at 1% while highlighting macro-financial stability concerns associated with low rates. JPMorgan expects Thailand to raise rates by 25 basis points each in February 2027, June and August, taking the policy rate to 1.75%.
Taiwan’s central bank also held rates steady. JPMorgan believes current inflation is not yet sufficient to drive further tightening: AI activity is relatively insensitive to interest rates, while rate increases would weigh on weaker small and medium-sized enterprises and non-technology sectors. If growth in AI income and fiscal transfers boost household demand, keeping services and core inflation persistently above 2%, while energy subsidies decline, the case for rate hikes in 2027 would strengthen.

JPMorgan believes the fifth plenary session of the twentieth Central Committee’s emphasis on strict Party governance and anti-corruption could further affect already cautious local officials’ willingness to advance new initiatives; however, this behavior is already incorporated in the bank’s growth outlook, so it expects the meeting’s outcome to have no significant effect on growth momentum in the fourth quarter of 2026 and the first quarter of 2027.
Although the meeting did not provide a new policy boost, the bank still expects resilient trade, continued implementation of fiscal spending and policy measures following the State Council meeting on 28 September to support PMIs. It expects the National Bureau of Statistics manufacturing PMI for October to hold steady at 50.1, and the RatingDog manufacturing PMI to edge down to 51.8, with trade disputes and energy costs remaining concerns.