Banks and financial institutions raise Hong Kong GDP forecasts after strong first-quarter results beat market expectations
Optimism prevails after most recent figures show local economy grew 4.7 per cent in first three months of year, easily surpassing analysts’ call of 3.3 per cent
Major banks and financial institutions have raised their forecasts for Hong Kong’s full-year GDP in 2018, after strong first-quarter results beat market expectations.
Standard Chartered this week improved its forecast from 3.4 to 3.8 per cent, after figures released last Friday showed the city’s economy grew 4.7 per cent in the first three months, easily surpassing analysts’ expectations of 3.3 per cent.
“The revision is mostly to reflect the stronger-than-expected start of the year, but also the surprisingly persistent strength of domestic consumption,” said Kelvin Lau, a senior economist for greater China at Standard Chartered.
Local consumers and tourists helped push retail sales up by 14.3 per cent in the first quarter compared with the same period last year, according to recent numbers from the Census and Statistics Department.
“Strong growth means the economy is in good shape to weather higher interest rates and trade concerns,” Lau said, alluding to rising US-China trade friction.
Bank of America Merrill Lynch made a larger adjustment, raising its expectation to 4 per cent, up from its prediction earlier this month of 3.5 per cent.
Meanwhile, UBS maintained its 4 per cent projection for the city. The Swiss investment bank was already among the most optimistic forecasters, arguing the combined effects of tax cuts and investment in innovation would boost the local economy.
For the financial year that began in April, Hong Kong cut salary tax and profit tax by 75 per cent, both subject to a ceiling of HK$30,000 (US$3,820). Officials also committed to spending HK$50 billion (US$6.37 billion) to promote the technology sector throughout the financial year.
UBS economist Li Zeng said the risks for the rest of the year seemed “balanced”.
“The major uncertainties on the downside are the ongoing US-China trade war and rising interest rates,” Li said.
Singapore-based bank DBS kept its GDP forecast for the city at 3.3 per cent.
“Spillover risks from external uncertainties such as the trade war and the potential slowdown in advanced economies reflected by the PMIs can weigh down Hong Kong’s growth,” said Samuel Tse Ka-hei, economist and senior associate at DBS Group Research.
The figure still far exceeded the 10-year trend of 2.7 per cent growth, Tse added.
Officials also took a cautious approach and left the full-year forecast unchanged – at 3 to 4 per cent – with government economist Andrew Au describing the first-quarter results as “rather exceptional”.
Hong Kong’s economy grew by 3.8 per cent last year, after rising only 2.1 per cent in 2016.