Hong Kong's economic growth has got off to a flying start this year, buoyed by a consumption recovery and strong external trade. Financial Secretary Paul Chan said the first-quarter GDP growth rate would accelerate from the 4 percent recorded in the fourth quarter of last year, making it the strongest quarterly expansion in nearly five years. A number of major banks have recently upgraded their full-year GDP forecasts for Hong Kong, with estimates ranging from 3.1 to 3.3 percent.
The Census and Statistics Department will release the advance estimates for first-quarter GDP tomorrow (May 5). In his latest blog post, Mr Chan wrote that with private consumption continuing to improve and exports and fixed investment maintaining good momentum, the GDP growth rate would surpass the previous quarter's 4 percent.
On retail consumption, the market has been on a clear recovery trajectory over the past year. The industry is committed to upgrading and transforming to respond to changing consumption patterns, while the government has been staging mega events to attract more visitors. Mr Chan noted that local consumer spending has increased year-on-year for six consecutive quarters. According to data from major electronic payment platforms in Hong Kong, retail and dining-related consumption rose 5.2 percent year-on-year in the first quarter, with spending at non-fast-food restaurants jumping nearly 8 percent.
At the same time, inbound tourism remains buoyant. Over 602,000 visitors arrived in the first two days of the Labour Day Golden Week, a 6 percent increase year-on-year. Visitors and locals alike could be spotted across the city—in streets, malls, and country parks—with many shops and restaurants anticipating brisk business over the holiday. In fact, visitor arrivals exceeded 14.3 million in the first quarter, another post-pandemic quarterly record. For the full year, total arrivals are likely to surpass the earlier estimate of 53.8 million, which is expected to drive total spending of over HK$240 billion, up 9.5 percent year-on-year, reinforcing the positive momentum in the retail and catering sectors and supporting overall economic growth and employment.
Exports rise for 25th consecutive month
Hong Kong's export performance remained robust in the first quarter, rising 32 percent in value terms, marking the 25th straight month of growth and the best quarter in five years. For the month of March alone, the increase approached 36 percent. Mr Chan said the rapid global development of artificial intelligence has fuelled strong demand for related and electronic products, cushioning the potential impact of geopolitical conflicts on local exports and the wider economy. Although geopolitical tensions pose certain challenges, new opportunities for growth and development continue to emerge for Hong Kong as an international trade hub.
Major banks upgrade full-year forecasts
Major banks have recently raised their GDP growth forecasts for Hong Kong this year. Citi lifted its forecast to 3.2 percent in February, while UBS, Nomura and Morgan Stanley all project 3.3 percent growth. Hang Seng Bank revised its estimate from 2.5 percent to 3.1 percent in March. These projections are broadly in line with the government's earlier forecast range of 2.5 to 3.5 percent set out in the Budget.
Nevertheless, Mr Chan acknowledged that external headwinds remain, including geopolitical risks, the Middle East situation and rising oil prices. He cited the International Monetary Fund, which last month downgraded its global growth forecast for this year to 3.1 percent and warned that continued or escalating conflicts would place greater pressure on global growth and inflation. The government has launched about HK$2 billion in short-term and targeted relief measures to support affected industries and small and medium-sized enterprises, and is working with the Hong Kong Monetary Authority and the banking sector to roll out a new round of credit support.
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