Hong Kong Budget 2017-2018

Analysts cast doubt on finance chief’s Hong Kong economic growth forecast

There are fears about US interest rate rises, Donald Trump’s China trade policy and persistent weakness in global trade

PUBLISHED : Wednesday, 22 February, 2017, 7:18pm
UPDATED : Thursday, 23 February, 2017, 10:52am

Hong Kong’s economy grew 1.9 per cent last year – the slowest rate since 2012. But a noted improvement in recent months prompted the government to forecast stronger growth of 2 to 3 per cent this year.

Growth picked up from 0.8 per cent in the first quarter to 3.1 per cent in the fourth thanks to a strong recovery in the export sector, Financial Secretary Paul Chan Mo-po said in his maiden budget speech delivered on Wednesday.

But analysts questioned whether Chan’s prediction might be too optimistic on the back of the risks arising from the prospect of more US interest rate rises, President Donald Trump’s uncertain trade policy and persistent weakness in global trade.

Chan attributed the modest growth mainly to the impact of the grim global economic situation on the city’s trade performance and a sharp decline in tourist numbers, particularly early last year.

But the downward pressure eased in recent mouths as the value of total exports of goods jumped 10.1 per cent and visitor numbers gained 5.4 per cent in December.

“In light of recent developments and granting no severe external shocks, I forecast GDP growth of 2 to 3 per cent in 2017,” Chan said.

Nevertheless, Chan’s projection is well above the market consensus of 1.8 per cent.

“We do not expect a material rebound in global trade which will weigh on Hong Kong’s exports, while growth in domestic demand will be somewhat dampened by higher interest rates,” said Marie Diron, associate managing director at credit rating agency Moody’s.

She predicted the city’s economy would grow only 1.5 per cent this year.

A government source told the Post that Chan’s GDP growth prediction had not taken into account any sudden deterioration in US policy towards trade with China as proposed by Trump during his election campaign because Chan thought the risk was low.

To support the future development of tourism, HK$17 million will be allocated to fund tourism projects with local features and “green tourism products” including tours to country parks and hiking trails.