Hong Kong economic growth exceeded the 10-year average in the second quarter, the third consecutive quarter of above-average expansion, and the government revised its full-year economic growth forecast for this year upwards by 1 percentage point. This is against a backdrop of an improving global economy.
In the April to June quarter Hong Kong’s GDP grew 3.8 percent from the same quarter last year after the city’s economy expanded 4.3 percent in the first quarter, the fastest pace in nearly six years. In the first half of this year, the economy grew 4 percent year on year.
Goods exports registered remarkable growth in the second quarter, up 5.6 percent year on year, as an improving global economy supported Asian exports. Services exports rose 2.3 percent in the same period.
Private consumption grew a brisk 5.3 percent. Overall investment spending strengthened 8 percent year on year.
As import prices and cost pressures remained subdued, underlying inflation stood at 1.7 percent in the first half of this year. The government predicted underlying inflation of 1.8 percent for the full year compared with the original estimate of 2 percent.
“With an improving global economy, vibrant domestic demand underpinned by a full-employment labor market and rising incomes, as well as resilient investment demand fuelled by construction and infrastructure activities, we decided to raise the GDP growth rate forecast from 3 to 4 percent for the full-year of 2017,” deputy government economist Andrew Au Sik-hung told reporters on Friday.
Financial Secretary Paul Chan Mo-po had expected the city’s economy to grow at a rate of 2 to 3 percent when he announced the government budget in February.
“The underlying picture is that the overall fundamentals in 2017 are better than in 2016,” said Thomas Shik, acting chief economist at Hang Seng Bank.
“We expect trade growth to continue to benefit from the improvement in the external environment, and strong labor market and favorable financial market conditions should continue to support household spending.”
Hang Seng Bank upgraded the city’s GDP growth prediction to 2.8 percent for this year after first-quarter growth figures were released in May.
However some economists are more cautious, saying many more economic, financial and geopolitical risk factors are still not factored into the market.
“Due to the waning base effect and an expected deceleration of the Chinese mainland’s growth, we expect the city’s economic growth to have peaked in the first quarter and to slow down gradually in the coming quarters.
“For 2017, our forecast on GDP growth remains unchanged at 2.2 percent,” OCBC Bank said in its economic research report.
“External recovery has been handy but headwinds remain strong. Firstly, interest-rate pressure should occur sooner than expected. Externally the threat of protectionism is only being replaced by heightened geopolitical risks in North Korea – whereas we see a fair risk of miscalculations and are mindful of a potential escalation later this year,” Daiwa Capital Markets cautioned.