Taiwan’s government has proposed a 2027 budget of about US$123 billion, combining increased public spending with a record allocation for national defence as the island seeks to strengthen its economy, support households and respond to growing security pressure from China.
The Cabinet approved the 2027 central government budget proposal on Thursday, August 20, with total central-government spending set at about NT$3.93 trillion. The proposal will now go to Taiwan’s opposition-controlled legislature for review and approval.
Record Defence Spending
A major feature of the proposed budget is a sharp increase in defence expenditure. Taiwan plans to spend approximately NT$1.1225 trillion (about US$35 billion) on defence in 2027, representing an increase of around 18% from the previous year and taking military spending above 3% of GDP for the first time.
The defence allocation includes funding for military modernization, drones, missiles and other capabilities intended to strengthen Taiwan’s ability to respond to potential military threats. The government has also emphasized the development of asymmetric capabilities and indigenous defence technologies, including submarine programmes.
President Lai Ching-te has described increased defence investment as an investment in peace, arguing that stronger military capabilities are necessary to preserve stability across the Taiwan Strait and the wider Indo-Pacific region. Lai has also set a longer-term goal of raising defence spending to 5% of GDP by 2030.
Economic Growth and Cash Payments
The proposed budget comes as Taiwan experiences strong economic growth driven largely by global demand for artificial intelligence, semiconductors, high-performance computing and cloud services.
The government has proposed setting aside NT$235.7 billion to provide a NT$10,000 cash payment to each resident in 2027. President Lai has presented the measure as a way of sharing the benefits of Taiwan’s technology-driven economic expansion more broadly, particularly with households and sectors outside the technology industry.
Other priorities in the proposed budget include family support, technological development, public infrastructure and greater financial assistance for local governments. Family-related measures are expected to receive about NT$373 billion.
Budget Faces Parliamentary Scrutiny
The proposal could face difficult negotiations in Taiwan’s legislature, where opposition parties hold the majority. Political disagreements over government spending and defence allocations have already contributed to lengthy budget disputes.
Taiwan’s parliament only approved the 2026 national budget on August 14, after a record delay of 266 days. Opposition lawmakers reduced the original proposal by NT$48 billion, although funding for a major drone programme was retained.
The 2027 proposal therefore comes at a time when the government must balance increased defence requirements with social spending and economic priorities, while securing legislative approval.
Rising Tensions With China
Taiwan’s decision to increase defence spending comes amid persistent tensions with China, which claims sovereignty over the democratically governed island and has increased military and political pressure around it.
Beijing has strongly opposed Taiwan’s efforts to strengthen its military capabilities and has criticized the island’s defence activities. Taipei, meanwhile, says maintaining credible defensive capabilities is essential to deterring conflict and protecting its democratic system.
The proposed US$123 billion 2027 budget, particularly its record defence component, is therefore likely to attract close attention from both Beijing and Washington as Taiwan seeks to strengthen its economy while preparing for a more uncertain regional security environment.
