Taiwan president announces record defence budget exceeding T$1 trillion for 2027

Record defence budget announced

President Lai Ching-te confirmed on Monday that Taiwan's total defence budget for 2027 will exceed T$1 trillion for the first time, reaching T$1.1225 trillion ($31.40 billion). The figure, combining the regular state budget and special budgets, will surpass 3% of Taiwan's gross domestic product. Lai framed the increase as a response to mounting military and political pressure from China, which claims the democratically governed island as its own territory and has not ruled out the use of force. Taiwan also faces calls from Washington to spend more on its own defence, mirroring U.S. pressure on Europe, which Lai has enthusiastically embraced.

Investing in defence is investing in peace; we will continue to build a more solid defence force to maintain peace and stability in the Taiwan Strait and the region.

Comparison with previous year

According to the same calculation method, the government draft for 2026 allocated T$949.5 billion for defence. The proposed 2027 figure represents an increase that Reuters reported as 16%, while Deutsche Welle and watson.ch calculated approximately 18% against the 2026 draft of T$949.5 billion. The presidential office did not immediately provide an official growth rate. The cabinet will formally unveil the budget on Thursday with a detailed breakdown of how the defence funds will be allocated across military modernisation programmes, including the development of made-in-Taiwan submarines.

Domestic political hurdles

Lai faces a parliament dominated by opposition parties, which only passed the 2026 budget late on Friday after months of delays. The two main opposition parties have said they will not write blank cheques for the government and have a duty to scrutinise spending plans and cut waste. Lai on Friday called on parliament to review the budget on the principles of "professionalism, reasonableness, and proportionality". Whether the proposed 2027 figure survives parliamentary negotiations unchanged remains open, given the opposition's stated intent to examine defence spending carefully.

Military context and exercises

China's military operates almost daily around Taiwan, including coast guard patrols, and holds periodic war games, the last in late December. Taiwan completed its annual Han Kuang military exercises last week, which included simulations of multiple conflict scenarios such as relocating military production lines, reducing internet speed, and countering a potential Chinese maritime blockade. China criticised the exercises as a "wasteful farce" and accused Taipei authorities of fuelling fears of war. Researchers note that Chinese operations around the island serve both psychological pressure and intelligence gathering purposes.

Broader budget and economic backdrop

The defence increase sits within a broader expansionary budget. Lai cited strong economic forecasts, with growth expected to reach its highest level in 39 years, driven by Taiwan's advantages in semiconductors, information technology, communications, and manufacturing supply chains. The budget includes T$235.7 billion in additional spending and a cash payment of T$10,000 per person (approximately €270) as a "shared AI dividend" for the population. Social measures include subsidies for children under 18, expanded parental leave benefits, and extended marriage and maternity leave. Lai said the fruits of growth would be shared by all and pledged to continue leveraging the historical opportunity presented by artificial intelligence.