Hong Kong Q1 GDP growth slows to near decade low - GulfToday

Hong Kong Q1 GDP growth slows to near decade low


Tourists take selfies at the Peak in Hong Kong, China. Reuters

Hong Kong’s economy grew at its slowest annual pace in nearly 10 years in the first quarter, an advance government estimate showed on Thursday, hit by a slowdown in exports and investment.

The Asian financial centre has been buffeted by China’s slowing economy and the US-China trade war, along with cooling property prices and volatile stock markets.

The economy grew 0.5 per cent in the January-March quarter from a year earlier, the weakest increase since the third quarter of 2009, compared with a revised 1.2 per cent pace of growth in the final quarter of 2018.

This was the first time the government has released a preliminary reading on gross domestic product (GDP).

On a quarterly basis, the economy expanded a seasonally adjusted 1.2 per cent after contracting a revised 0.5 per cent in the fourth quarter.

“Total exports of goods weakened further in the first quarter, similar to the situation in many other Asian economies,” a government spokesman said in a statement.

“Exports of services also recorded decelerated growth, yet sustained expansion of inbound tourism continued to provide support.”

Private consumption grew marginally and overall investment expenditure contracted as business sentiment had turned cautious since the latter part of 2018, the spokesman said.

Paul Tang, chief economist of Bank of East Asia, said the economy looked set to improve in the near future thanks to the positive wealth effect from stronger stock and property markets.

“We are quite sure the performance in the first quarter is the worse, and a recovery in the second half will become more obvious,” Tang said, adding that positive signs in Sino-US trade talks and a stabilising Chinese economy were lending support to business confidence.

Hong Kong’s Financial Secretary Paul Chan said on his blog that first-quarter growth would be modest on a year-on-year basis and would be much lower than the fourth quarter amid increased uncertainties in the political and economic environment.

In February, Chan forecast the city’s economy would expand 2-3 per cent this year, compared with 3 per cent in 2018. He also predicted growth would average 3 per cent from 2020-2023.

Though the coastal city’s share of China’s trade has declined with the rise of mega-ports on the mainland, its open economy remains highly vulnerable to external risks. In addition to trade, it is highly reliant on tourists and investment flows from China.

“If the trade issues could be resolved to some extent and part or all of the tariffs previously imposed could be lifted, global economic sentiment will be boosted, facilitating the growth of Hong Kong’s economy,” Chan said.

The United States and China are nearing a trade deal that would roll back a portion of the $250 billion in US tariffs on Chinese goods, Politico reported on Wednesday after US Treasury Secretary Steven Mnuchin said the two countries completed “productive” talks in Beijing.

As for China’s economy, it is starting to show some signs of bottoming out in response to stimulus measures, but analysts say it is too early to call a turnaround.

While conditions are expected to stabilise around mid-year, economists caution that China is unlikely to see a sharp rebound as in the past, noting Beijing’s stimulus measures so far have been relatively more restrained. That would mean more subdued recoveries in Hong Kong and other trade-reliant Asian economies.

Hong Kong will release first-quarter data and its latest economic forecasts for the year on May 17. (Editing by Jacqueline Wong)

Hong Kong stocks closed firmer on Thursday as investors cheered signs of progress in the US-China trade negotiations, while financials and property shares boosted the index after the US Federal Reserve kept the target range for policy rate steady.  At the close of trade, the Hang Seng index was up 245.07 points, or 0.83 per cent, at 29,944.18. The Hang Seng China Enterprises index closed 0.13 per cent higher at 11,556.72. Hong Kong stocks gained on Thursday as investors welcomed signs that negotiations to resolve the US-China trade row were moving to higher levels.

As of midday break, Hong Kong’s main Hang Seng index was up 188.02 points, or 0.63 per cent, at 29,887.13, while China’s H-shares index edged up 0.01 per cent to 11,543.41.

China markets were closed for Labour Day holiday and will resume trading on May 6. The United States and China are nearing a trade deal that would roll back a portion of on Wednesday after US Treasury Secretary Steven the $250 billion in US tariffs on Chinese goods, Politico reported Mnuchin said the two countries completed “productive” talks in Beijing.


Related articles