Year-on-year growth tapered off from the first quarter’s 2.9 per cent increase compared with the same period last year.

Nearly 13 million visitors arrive in Hong Kong in first half of this year

The government’s previous forecast was for full-year gross domestic product (GDP) growth of between 3.5 per cent and 5.5 per cent.

Government economist Adolph Leung Wing-sing said the forecast was revised, taking into account the actual out-turn in the first half of 2023.

“Looking ahead, inbound tourism and private consumption will remain the major drivers of economic growth for the rest of the year,” he said. “Yet, the difficult global economic environment will continue to weigh on Hong Kong’s exports of goods.”

The latest GDP forecast was in line with estimates by 18 financial analysts, who anticipated growth of 3.3 to 5.5 per cent for 2023, or 4.2 per cent on average. Last year, GDP shrank 3.5 per cent compared with 2021.

On a quarter-on-quarter basis, GDP contracted 1.3 per cent in the second three months from the first. Leung said that in the first half of the year, GDP rose 2.2 per cent from the same period in 2022.

While inflation had retreated in Europe and the United States, global demand would continue to be suppressed as interest rates were expected to remain at higher levels, he said.

The trade sector continues to be a drag on Hong Kong’s overall economy. Exports of goods in the second quarter declined by 15.2 per cent over a year ago, after falling 18.9 per cent in the first three months. Imports dropped by 16.1 per cent, compared with a previous decline of 14.6 per cent.

Leung noted that overall investment expenditure in the second quarter was poorer than expected, declining 0.9 per cent, amid a higher interest rate regime.

He expressed confidence that economic growth in the second half would gain momentum and meet the government’s full-year forecast as investment expenditure was likely to rebound after Beijing unveiled favourable policy directions. There was also a lower base for comparison in the second half of 2022.

Hong Kong logs 1.5 per cent growth in second quarter amid sluggish economic recovery

Gary Ng Cheuk-yan, a senior economist at Natixis Corporate and Investment Bank, said he expected the government’s full-year forecast would materialise as last year’s contraction had provided a foundation for economic gains.

The city’s GDP fell by 4.6 per cent and 4.1 per cent year on year during last year’s third and fourth quarters, respectively.

“Even if tourism drives a rebound in consumption, the expected rebound [in GDP] would still mostly be due to the really poor performance last year,” Ng said, stressing that any growth this year should not be considered a sign of a robust post-pandemic recovery.

The senior economist said he saw no signs of investment recovery in Hong Kong, citing land sale prices, office space occupancy and limited activity concerning initial public offerings as unfavourable indicators.

The city reported economic contractions in 2019, 2020 and 2022.

Government economist Leung on Friday acknowledged that even if the city’s full-year growth aligned with authorities’ updated forecast, GDP for all of 2023 would still be slightly lower than in 2018.

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On the same day, Singapore scaled back its most optimistic full-year economic forecast for this year from 2.5 per cent to 1.5 per cent, citing weak global demand.

But the city state left the lower end of the growth forecast range at 0.5 per cent.

The Tourism Board earlier in the day said that Hong Kong recorded 3.59 million arrivals in July, a 31 per cent increase compared with the previous month, while the number of mainland Chinese tourists returned to 72 per cent of pre-pandemic levels.

It said Hong Kong welcomed 16.47 million visitors in the first seven months of the year, equivalent to 47 per cent of the total for the same period in 2019, when social unrest sparked by a now-withdrawn extradition bill had yet to affect tourism.

The city received 2.98 million mainland tourists in July, compared with 4.16 million in the same month in 2019.

According to the board, the number of arrivals from the Philippines and Thailand exceeded 90 per cent of pre-pandemic levels, but it did not provide a country breakdown.

The 3.59 million arrivals in July represent 69 per cent of the visitor numbers for the same month in 2019.

“Hong Kong’s tourism industry is recovering gradually,” said Dane Cheng Ting-yat, executive director of the board. “With the change in travel and spending behaviour after the pandemic, visitors are looking for more in-depth and diversified experiences.”

He said the board would continue to invite influencers and trade representatives to experience the city’s tourist attractions and promote them through word of mouth.

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Visitors have shown a stronger preference for the city’s nature and cultural sites compared with shopping malls, the board added. It also reported a strong recovery in convention and exhibition tourism.

Singapore has continued to outpace Hong Kong when it comes to post-pandemic tourism recovery. The city state, which rolled back its Covid-19 quarantine measures months before Hong Kong, saw 1.42 million tourists in July, which is 79 per cent of the number of arrivals it recorded for the same month in 2019.

Officials and industry insiders have blamed limited flight capacity in Hong Kong as one of the reasons for its slower recovery.