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Hong Kong's first-quarter GDP to pick up as exports, retail sales rebound
May 10, 2017 / 10:34 AM / 6 months ago

Hong Kong's first-quarter GDP to pick up as exports, retail sales rebound

HONG KONG (Reuters) - Hong Kong’s economy likely got off to a firm start in the first quarter helped by buoyant global trade and the wealth effects from the city’s robust property market, though analysts warned growth may not be as stellar in the coming quarters.

FILE PHOTO: General view of land development at the Kai Tak area, which is the location of city's former airport, in Hong Kong, China March 14, 2017. REUTERS/Bobby Yip

The economy was forecast to expand 3.4 percent in the January-March quarter from a year earlier, compared with 3.1 percent in the last quarter of 2016, according to the median estimate of 11 analysts surveyed by Reuters.

If realized, growth would exceed the top end of the government’s projected range of 2 to 3 percent for 2017, a boon for the incoming administration of Carrie Lam who will be sworn in on July 1 as chief executive.

On a sequential basis, the economy was forecast to expand a seasonally adjusted 0.6 percent, according to six economists.

“Growth was likely supported by slowly improving external demand and the strengthening property market,” HSBC economists said in a note.

After six years of disappointing growth, the world economy is gaining momentum, fueled by a cyclical recovery in manufacturing and buoyant financial markets despite the overhang of increased trade protectionism around the world.

The International Monetary Fund last month bumped up its 2017 global growth forecast to 3.5 percent from 3.4 percent in January and China clocked a growth rate of 6.9 percent in the first quarter of 2017, its fastest in six quarters.

Demand from mainland China meant more goods were shipped through Hong Kong’s ports, with March exports growing 17 percent from a year earlier.

HOME PRICES ON FIRE

Hong Kong’s private home prices hit a record high for a fifth consecutive month in March, raising concerns the government may announce fresh curbs on runaway prices.

Though the global economic outlook may be cloudy, some analysts such as Sylvia Sheng, Greater China economist at Bank of America Merrill Lynch, said solid private consumption and a resilient labor market will continue to support the economy.

But with China also embarking on a regulatory crackdown on shadow banking products in recent weeks to , some analysts warn growth may slow ahead.

“First quarter growth may be a peak as China’s tightening policies will pose headwinds for the economy,” said Raymond Yeung, chief economist for Greater China at ANZ in Hong Kong.

Rising home prices and a booming stock market have resulted in homeowners feeling more wealthy while mainland buyers also flocked to Hong Kong, fuelling a rebound in retail sales.

But soaring property costs will be problematic for the new administration in the former British colony where the population is already under strain from high living costs and a widening wealth gap.

Editing by Jacqueline Wong

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