Economic growth slows in first quarter as inflation looms

Property cooling measures, drop in exports to US, Europe and Japan, and monetary easing overseas contribute to lower rate of expansion

PUBLISHED : Saturday, 11 May, 2013, 12:00am
UPDATED : Saturday, 11 May, 2013, 4:23am

Hong Kong's economic growth slowed in the first three months of the year.

Real gross domestic product rose only 0.2 per cent on a seasonally adjusted quarter-to-quarter basis, down from 1.4 per cent in the last three months of 2012.

Year on year, output in the first quarter rose 2.8 per cent, beating market estimates.

Officials said the city's economy continued to grow moderately with improving global circumstances compared with the latter half of last year. They maintained their forecast that GDP will grow by 1.5 per cent to 3.5 per cent this year.

Government economist Helen Chan said inflation was expected to edge up in the coming months, but kept the full-year inflation forecast at 4.2 per cent. Last year consumer prices rose 4.1 per cent. The short-term rise would be the result of increases in rents last year, she said.

For the first quarter of the year, inflation was 3.8 per cent. Chan credited the government's latest measures to cool the property market for the outcome.

Dr Li Kui-wai, of City University's department of economics and finance, said that although the government was pushing down property prices, speculators could still put money into other investments, including the stock market, which could push up inflation this year.

The fortunes of the Hong Kong economy would continue to fluctuate as countries such as Japan implemented monetary easing policies, Chan said.

The depreciation of the Japanese yen could have an adverse effect on the city's exports, which grew 8.8 per cent in the first quarter, because it makes Japanese exports cheaper. But a weaker yen could also alleviate price rises, since imports of Japanese goods would cost less.

A drop in exports to the United States, Europe and Japan was offset by increases in exports to the mainland, which rose 8.5 per cent year on year, and to the rest of Asia, which rose 3.8 per cent. Almost all Hong Kong's exports are re-exports, mostly to and from the mainland.

The seasonally adjusted unemployment rate for the first quarter of the year was 3.5 per cent. Chan said this was relatively low and contributed to the "brisk" 7 per cent growth in private consumption.

"With improvements in income and a stable labour market, people are more willing to spend," she said.

Chan attributed the slower economic growth in part to a 2.2 per cent drop in investment spending and a 4 per cent drop in investment in machinery and equipment. But exports of services rose 4.9 per cent year on year, helped by a 15.3 per cent growth in travel-related services.

Chan said data on the impact of the recent dockers' strike was not yet available.