Traffic is seen between office buildings at sunset in downtown Hong Kong, China June 29, 2017. Picture taken June 29, 2017. REUTERS/Bobby Yip
November 10, 2017
By Donny Kwok and Twinnie Siu
HONG KONG (Reuters) – Hong Kong’s trade-reliant economy posted slower growth in the third quarter, but strong consumption and rebounding exports led the government to nudge up its growth outlook for 2017.
Supported by improving retail sales, a rebound in mainland tourist arrivals and strong global trade, the economy grew a seasonally-adjusted 0.5 percent in the third quarter. That compared with upwardly revised 1.1 percent growth previously.
From a year earlier, the economy expanded 3.6 percent in the third quarter compared with revised 3.9 percent growth in the second. Economists had forecast an expansion of 3.5 percent.
The still-solid momentum puts the former British colony firmly on track to achieve the government’s revised full-year estimate of 3.7 percent growth for 2017 as buoyant stock and property markets helped spur consumer spending.
In October, it forecast full-year growth of 3-4 percent.
Looking ahead, the government expects the economy to remain on a solid footing although it warned of the prospect of higher interest rates in the United States and elevated geopolitical risks globally.
“Along with an improving global outlook, major advanced economies are likely to show further moderate expansion in the rest of the year,” the government said in a statement.
“The mainland economy is also set to sustain sound and notable growth. The expansion in global demand should bode well for Asia’s and Hong Kong’s goods exports in the near term.”
EXPORTS, RETAIL SALES STRONG
Exports recorded year-on-year growth of 5.5 percent in real terms in the third quarter, led by those to Asian markets.
A pick-up in the number of visitors from mainland China and Hong Kong’s retail sales growing at their fastest annual pace in more than 30 months in September has boosted economic activity.
Further underpinning growth have been record high property prices and a buoyant stock market.
“The strength of private consumption is due to a relative low unemployment rate and wealth effect due to buoyant property and stocks markets,” said Thomas Shik, acting chief economist of Hang Seng Bank.
“The positive factors are likely to continue in the following quarter,” Shik said, adding the bank was likely to revise up its 2017 growth forecast, currently at 3.4 percent.
The government said upside risks to inflation remained limited, prompting it to revise down underlying and
headline consumer price inflation for 2017 to 1.7 percent and 1.5 percent, respectively, from 1.8 percent and 1.6 percent.
With its economy closely tied to its giant northern neighbour, Hong Kong has also gained from buoyant trading and manufacturing activities linked to China’s resilient economic activity this year.
Some economists have warned, however, that the city could face pressure from rising borrowing costs and increasing tensions with Beijing that could threaten stability and impede policy-making.
Since Hong Kong returned to Chinese rule in 1997, Beijing has gradually increased control over the city even though it promised wide-ranging freedoms and autonomy not allowed on the mainland under the formula of “one country, two systems”.
(Additional reporting by Anne Marie Roantree; Editing by Jacqueline Wong)