HONG KONG (Reuters) – Hong Kong’s economic growth slowed in the second quarter from a year earlier, advance government data showed on Monday, with the momentum softening after a strong rebound in the preceding quarter.
Total exports of goods continued to plummet as the external demand for goods remained weak, and overall investment expenditure saw a mild decline amid tightened financial conditions, the government said.
Gross domestic product expanded 1.5% in the second quarter compared with a revised 2.9% growth in the previous quarter, helped by recovering domestic economic activity, private consumption and inbound tourism.
“The weaker-than-expected Q2 economic performance was probably attributable to higher interest rates and a further slowdown in the global economy,” said Thomas Shik, chief economist at Hang Seng Bank.
The result was slower than the 3.6% year-on-year growth forecast by 10 economists in a Reuters poll.
“Looking ahead, inbound tourism and private consumption will remain the major drivers of economic growth for the rest of the year,” a government spokesman said.
“The improving economic situation and prospects should bode well for domestic demand, though tight financial conditions may impose constraints,” the spokesman added.
The government’s measures to boost the recovery momentum will provide support to private consumption, while exports of goods will continue to face intense pressure amid slower global economic growth weighs on external demand, the government said.
On a seasonally adjusted quarterly basis, the economy decreased 1.3% in April to June, according to official data, the biggest drop since Q3 in 2022 when it was down 2.5%. That compared to a 1% growth forecast in the Reuters poll.
StanChart said in a research note that mainland tourist arrivals still had some way to go before normalising.
Preliminary visitor arrivals for June were 2.75 million, bringing the total for the first half year of 2023 to 12.88 million visitors, according to the data from Hong Kong Tourism Board, compared to 76,004 in January-June period in 2022.
The government launched a promotional campaign earlier in March called “Hello Hong Kong” after lifting all strict COVID-19 restrictions in the city, to bring back tourists and businesses and also launched a “Happy Hong Kong” campaign in late May to boost local spending and the economy.
“A recovery in consumption and tourism should help more than offset such a negative effect, just like what the Q2 data showed,” Shik added.
According to the government, its economy is expected to grow 3.5% to 5.5% this year after shrinking 3.5% in 2022.
HSBC, Barclays, DBS, Natixis, Standard Chartered and Bank of East Asia forecast Hong Kong’s GDP to grow between 4.3% and 5.0% in 2023.
“It is hard for the government to shore up economic growth unless it untangles the complex knot of weak confidence,” said Gary Ng, senior economist at Natixis Corporate and Investment Bank.
“The government should extend its subsidies to ease the pressure on higher living costs in the short run, but it ultimately needs to find growth drivers for the economy,” Ng said.
(Reporting by Twinnie Siu and Donny Kwok; Editing by Bernadette Baum)
