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Saturday, August 15, 2015, 12:57

HK economy expands 2.8% in 2nd quarter

By Oswald Chan in Hong Kong

Hong Kong’s economy expanded 2.8 percent annually in real terms in the second quarter this year — up from 2.4 percent in the first quarter — propelled by resilient domestic demand and exports of financial and business services.

The government, however, still fears that notable downside risks in the external environment may drag down the economy.

In the first half of 2015, the city’s economy gained 2.6 percent and was poised for further moderate growth in the second half. The real GDP growth forecast for 2015 whole year was revised upward to 2 to 3 percent, against the prediction of 1 to 3 percent made in May this year, the government said in a statement.

"Though domestic demand is supported by a steady labor market with favorable job and income conditions, ongoing infrastructure and stimulus effects from budget initiatives, near-term export performance is likely to remain subdued,” government economist Helen Chan told a press conference on Friday.

"We also see the downward trend in inbound tourism is becoming more entrenched,” she added.

"Moreover, with the imminent US interest rate hike, fragile recovery of the eurozone and Japan, and sudden capital outflows on emerging market economies, the downside risks in the external environment remain notable,” Chan warned.

Private consumption expenditure grew 6 percent in the second quarter over a year earlier, supported by full employment and rising incomes. Investment expenditure also increased 6.5 percent in the same period, helped by a rebound in building and construction works and growth in machinery and equipment acquisition. Government consumption expenditure increased 3.3 percent.

The export sector still remains subdued, as the city’s total exports of goods slackened to a decline of 3.6 percent in the second quarter, the first decline since the first quarter of 2014.

In its economic report, DBS (Hong Kong) said, “As (Hong Kong) equity prices come under pressure and risks to the property market increase, locals’ spending would slow in the third quarter and even in the fourth quarter.”

The report also said, “Private investment growth may be held back due to slowing mainland economic growth. Recent renminbi depreciation would affect certain companies’ earnings and this in turn may affect their investment plans.”

ANZ Bank said, “The mainland’s move toward a managed floating exchange rate system with a depreciation bias in the short term suggests that the HK dollar has become the strongest currency in the world. This is because of its Linked Exchange Rate System with the US dollar. Business costs will rise further relative to those in Singapore and Shanghai, its two main competitors.”

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