Hong Kong GDP outlook lifted on China; Singapore sees high costs

HONG Kong’s economy is likely to expand faster than initially thought as China’s reopening spurs activity, while rival financial hub Singapore is expected to continue contending with price pressures.

That’s according to the latest Bloomberg survey, in which economists raised their forecasts for Hong Kong’s gross domestic product (GDP) growth while lowering their expectations for Singapore.

Hong Kong’s economy is expected to expand 3.4 per cent this year and 3.5 per cent next year, from previous estimates of 2.7 per cent and 2.8 per cent, respectively, according to the median estimate in a Bloomberg survey of economists.

Singapore’s GDP is expected to expand by 1.9 per cent this year, down from a previous estimate of 2.2 per cent, according to the survey.

“Hong Kong will benefit from China’s reopening, but the phantom of high-interest rates may continue to pressure consumption, property investment and external trade,” said Gary Ng, an economist at Natixis. The city is expected to continue raising interest rates in line with the US Federal Reserve, given the local dollar’s peg to the greenback.

“The growing inflationary pressure, the still-wide fiscal deficit and, more importantly, the battered but recovered investment sentiment can still drag future potential growth” for Hong Kong, Ng added.

Hong Kong’s retail sales and services exports are expected to recover this year given China’s reopening, according to Lloyd Chan, an economist at Oxford Economics. Though he was bearish on the pace of growth given headwinds from interest rates and soft global demand: The firm forecasts GDP growth for the city of just 2.2 per cent in 2023.

Economists in both the Hong Kong and Singapore surveys also expect pressures on consumer prices to increase either this year or next.

Hong Kong’s consumer price index (CPI) is expected to rise 2.7 per cent in the final quarter of 2023 from a year ago, according to economists. That would be the highest since last September. The annual CPI forecast for 2023 remained unchanged at 2.4 per cent in the survey, though economists raised their expectations for next year to 2.3 per cent from 2 per cent.

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Economists raised their estimates for Singapore’s CPI to 4.7 per cent and 2.8 per cent for 2023 and 2024, respectively, from earlier expectations of 4.1 per cent and 2.5 per cent.

“Weak global demand, particularly for electronics, will drag on exports while multi-decade high-interest rates will suppress domestic demand,” said Shivaan Tandon, an economist at Capital Economics, said of Singapore’s economy.

They expect the country’s GDP to grow just 0.8 per cent in 2023. BLOOMBERG