Hong Kong economy growth beats expectations on brisk exports
HONG Kong’s economy grew faster than expected in the second quarter, pointing to some stability in key sectors despite challenges in real estate and retail.
Gross domestic product expanded 3.3 per cent in the three months ended June from the prior year, according to advance estimates from the Census and Statistics Department on Wednesday (Jul 31). That exceeded even the most bullish forecast among 11 economists surveyed by Bloomberg News, and followed strong first-quarter growth that was revised up to 2.8 per cent from 2.7 per cent.
The data signals resilience in the region’s financial hub after several years of pressure from the pandemic and high borrowing costs. Increasing trade and capital flows from mainland China into the city have helped buoy growth so far this year.
Exports grew at a double-digit pace for the last three straight months, driven by strong global demand. But the outlook remains challenged by the real estate sector downturn and a slowing economy in China, the city’s largest trading partner.
Hong Kong’s economy is one of the slowest-growing in the region. Analysts surveyed by Bloomberg expect growth will dip to a 2.7 per cent pace this year from 3.3 per cent in 2023, the only developed economy in Asia forecast to slow except Japan.
On a quarterly basis, GDP expanded 0.4 per cent from the first quarter, according to the statement. The city’s government set a growth target of 2.5 to 3.5 per cent for 2024.
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Goods exports and imports of services rose the most among GDP components from the prior year. Fixed capital formation, a category that includes the total value of investment spending, also increased at a faster pace.
Private consumption fell in the quarter for the first time since the third quarter of 2022. Spending has been restrained by a strong currency, pegged to the US dollar, and weaker sentiment.
Real estate has been a particular sore spot, as demand remains weak with higher mortgage rates. Residential property prices have fallen to their lowest since 2016, increasing the risk of homebuyers finding themselves under water on loans. Office buildings are finding it difficult to attract tenants.
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The dour mood and more frugal tourists have also kept a lid on retail spending, with sales falling for a third straight month in May, the longest streak since 2021. Many locals also spend across the border in Shenzhen and other mainland cities where goods and services tend to be cheaper.
Earlier this week, Hong Kong Financial Secretary Paul Chan said the economy continues to grow, and that lower interest rates later this year would support investment. BLOOMBERG
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