Hong Kong economy rebounds more than expected in Q1 as outlook brightens
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The expansion ends a year-long spell in which the finance hub was effectively closed for business over pandemic restrictions.
ST PHOTO: KELVIN CHNG
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Hong Kong – Hong Kong’s economy grew 2.7 per cent in the first quarter of 2023, snapping four consecutive quarters of contraction, as the reopening of its borders revived spending.
Although exports continued to decline in the first quarter, faster growth in mainland China’s economy, coupled with acceleration of Hong Kong’s aviation capacity, would provide further support, said Chief Executive John Lee.
“Economy growth in the second quarter will be better than in the first quarter,” he told a regular news briefing.
“The economy this year will be better than last year.”
The latest quarterly figure compared with a 4.1 per cent contraction in the previous quarter, Mr Lee said, prior to the scheduled release of the data later on Tuesday.
Economists from Barclays had expected a contraction of 0.9 per cent in first-quarter gross domestic product, while Natixis and Hang Seng Bank forecast growth of 1.1 per cent and 2.5 per cent, respectively.
On a seasonally adjusted quarterly basis, the economy grew 5.3 per cent in the period from January to March, according to official data that confirmed Mr Lee’s earlier figure.
The government said inbound tourism and domestic demand would remain the major drivers of economic growth in 2023, and visitor arrivals should recover further as transport and handling capacity continue to catch up.
“The improving economic situation and prospects should boost domestic demand, though tight financial conditions will remain a constraint,” said a government spokesman.
Battered by its own pandemic measures as well as spillover from China’s stringent zero-Covid policy, Hong Kong’s economy is expected to benefit in 2023 from recovering consumer spending on the mainland and a rebound in travel.
All pandemic curbs have been lifted, with Mr Lee prioritising improving international competitiveness and attracting more overseas talent.
“Incoming data pointed to a recovery in the tourism and retail sectors, supporting the Hong Kong economy to return to the path of expansion for the year,” said Mr Thomas Shik, chief economist at Hang Seng Bank.
“That said, the relatively weak trade performance suggested that a global slowdown continued to pose challenges to the growth outlook.”
Hong Kong also faces risks from high inflation and aggressive monetary tightening in advanced economies, with higher borrowing costs and a pessimistic economic outlook hitting asset prices.
Officials from the International Monetary Fund said on Tuesday that the main risk remains the global economy.
“On the downside, at the moment, we’re mostly worried about external risks... On the real side, the global economy has been slowing,” Mr Thomas Helbling, the IMF’s deputy director for the Asia and Pacific department, said at a briefing in Hong Kong on Tuesday about the organisation’s economic outlook for the region.
Another concern is “further tightening of credit in the United States or in the euro area, which could then hit Hong Kong through trade channels”, Mr Helbling said. “On the upside, we see some scope for stronger pent-up demand in Hong Kong as well as in China.”
Barclays, Hang Seng Bank, DBS, Natixis and Standard Chartered forecast Hong Kong’s GDP to grow between 3 per cent and 6.5 per cent in 2023. REUTERS, BLOOMBERG
