Exports help economy keep up strong growth
Hong Kong's economy grew strongly in the first quarter on the back of continued export vitality and healthy domestic demand.
Gross domestic product grew 6 per cent in real terms on the same period last year, although government economists warned that external weakness would slow the pace over the rest of the year.
Nevertheless, they maintained a forecast, spelled out in the March budget, for full-year growth of 4.5 to 5.5 per cent, after 8.1 per cent for the whole of last year.
'We have achieved low inflation and reasonably rapid growth during the first three months of 2005,' said government economist Kwok Kwok-chuen. 'It was an across-the-board expansion. We have had reasonable growth both in the external sector as well as in domestic demand and we expect this to continue in the next few months.'
Domestic consumption has remained resilient due to falling unemployment - hitting a 41-month low of 5.9 per cent in the three months to end of April - and a rebound in the property market.
But pressure on prices remains subdued, with wage rises still flat and rents yet to hit pre-Sars levels, despite reports of large increases.
'It is important to keep in mind that Hong Kong's rental market is a very open one. If rents are going up it is because demand is exceeding supply ... it is all market driven,' Mr Kwok said.
Although consumer prices for the quarter rose just 0.4 per cent, full-year inflation of 1.5 per cent was still expected as rental contracts were renegotiated, he said.
First-quarter exports grew 8.9 per cent, with re-exports to and from the mainland continuing to be the key driver for growth.
Services exports have also continued to climb, adding 8.6 per cent in the first quarter. Tourism in particular would help to keep this sector ticking over, particularly towards the end of the year with the opening of Disney theme park.
Mr Kwok saw little impact from moves by the US and Europe to limit cheap textile exports from the mainland.
'The impact on Hong Kong is not certain because ... some of the products will be shifted to be made in Hong Kong,' he said, noting that textile exports made up just 4 per cent of total exports in 2004.
More problematic for such an open economy was the trend towards more-protectionist trade policies among some of Hong Kong's biggest trading partners.
'The main concern from our perspective is that protectionist measures are harmful to world trade ... they hurt everyone.'
The government's Principal Economist, Helen Chan, said concerns included sustained high crude oil prices, a weaker outlook for the region and a stronger US dollar's dampening effect on the attractiveness of Hong Kong exports. 'Although there are more risks in the external sector,' Ms Chan said, 'the local economy is slowly picking up so we remain cautiously optimistic.'
