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Hong Kong economy

Hong Kong government maintains cautious approach as economy powers ahead with ‘rather exceptional’ 4.7 per cent growth in first quarter

Bumper stock and property markets see growth outstrip the 3.3 to 3.4 per cent rise predicted by economists

PUBLISHED : Friday, 11 May, 2018, 4:52pm
UPDATED : Friday, 11 May, 2018, 11:29pm

Hong Kong’s economy continued last year’s robust growth, jumping a stronger than expected 4.7 per cent in the first quarter of 2018 amid bumper stock and property markets. 

However, the government’s forecast for the full year remains unchanged – three to four per cent – since the first quarter result is “rather exceptional”, according to government economist Andrew Au.

The rise in gross domestic product (GDP) beats the estimated 3.3 and 3.4 per cent rise by analysts polled by the Post.

“The first quarter result was driven by rising asset prices, especially the booming property market and stock market seen last year,” Au said on Friday. “But uncertainties such as the US and China trade tensions have increased.”

Francois Perrin, a portfolio manager and China team leader at East Capital, said the GDP growth rate for the remaining year will cool down.

Private consumption led the growth by rising 8.6 per cent from the same period last year, as unemployment sank to a 20-year low of 2.9 per cent, and asset prices increased.

The benchmark Hang Seng Index jumped 35 per cent last year, outperforming other major stock markets. Hong Kong’s secondary home prices rose for 21 consecutive months to December, the longest stretch of gains since 1993.

“Data on retail sales, trade and employment for the first three months suggest that Hong Kong’s fundamentals remain strong. We expect domestic demand to continue to be the key driver of growth,” said Thomas Shik Chun-sing, chief economist and head of economic research at Hang Seng Bank.

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The city’s first quarter performance marks a good start to the year as Financial Secretary Paul Chan Mo-po forecast economic growth of between 3 and 4 per cent in his annual budget in February.

The target is still challenging as the tightening monetary policy by the US Federal Reserve sets to weigh down on Hong Kong’s economy, with the city’s currency pegged with the US dollar, according to economists.

“The current rate hike path targeted by the Fed will pressure Hibor on the rise, putting more pressure on the real estate sector going forward,” Perrin said.

Au said homebuyers should stay alert as Hong Kong’s mortgage rates will rise accordingly, as the US Federal Reserve aims to raise rates three or four times this year.

The city’s economy sustained notable expansion last year, growing 3.8 per cent for the year as a whole, up from 2.1 per cent in 2016. 

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Hong Kong’s competing economies in the region showed signs of slower growth. Guangzhou, the capital city of southern Chinese province Guangdong, posted economic growth of 4.3 per cent in the first quarter of 2018, down from an expansion of 8.2 per cent in the same period last year, according to official numbers released on Thursday.

The city’s factory output, retail sales and exports all fell slightly compared with the same period in 2017. The figures were a blow to Guangzhou amid fierce competition among cities in the Great Bay Area, which includes Hong Kong and Shenzhen, to attract capital and talents, economists said.

Shenzhen’s full year GDP surpassed Hong Kong for the first time last year, as the economy of the innovation hub reached 2.24 trillion yuan. Hong Kong’s gross domestic product in 2017 was HK$2.66 trillion, or 2.21 trillion yuan using the exchange rate at the end of the year.