The reflection of skyscrapers shimmers in the water of Victoria Harbour, Hong Kong on Jan 2, 2023. (PHOTO / CHINA DAILY)
Hong Kong's economic expansion slowed to 1.5 percent in the second quarter from a year ago, as inbound tourism and private consumption fueled the growth but a dismal performance in exports weakened its momentum.
According to the advance estimates of economic output released by the Census and Statistics Department on Monday, on a seasonally adjusted quarter-to-quarter basis, GDP fell 1.3 percent in real terms in the second quarter. The GDP year-to-year growth rate was 2.9 percent in the first quarter.
"Led by inbound tourism and private consumption, the Hong Kong economy continued to recover in the second quarter of 2023, though the momentum softened on the back of the strong rebound in the preceding quarter," a government spokesman said.
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The spokesman attributed the slower growth rate to total exports of goods, which "continued to plummet as the external demand for goods remained weak".
The impact of rising interest rates has caused a slowdown in the global economy, which has in turn affected Hong Kong's foreign trade performance. Hong Kong's imports and exports of goods have continued to record double-digit year-on-year declines in volume.
Thomas Shik, Chief economist at Hang Seng Bank
The city's total exports of goods, measured in national accounts terms, declined by 15.3 percent year-on-year in the second quarter, following a decrease of 18.9 percent from January through March.
Imports of goods measured in national accounts terms also fell by 16.1 percent in real terms during the same period, compared to a decline of 14.6 percent in the previous three months.
Exports of services, meanwhile, surged by 22.6 percent year-on-year over the same period, faster than the increase of 16.6 percent in the first quarter.
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Imports of services accelerated the growth to 30.2 percent from 20.7 percent in the first quarter.
"Looking ahead, inbound tourism and private consumption will remain the major drivers of economic growth for the rest of the year," the spokesman said.
Private consumption expenditures increased by 8.5 percent year-on-year in April through June, down by 4.5 percentage points from the previous three months.
Gross domestic fixed capital formation fell by 1 percent in the second quarter from a year earlier, reversing the trend of a 7.9 percent increase in the first quarter.
Thomas Shik, chief economist and head of economic research at Hang Seng Bank, said that the main reasons for the GDP's cooling growth momentum are the interest rates hikes and continued uncertainty in the external environment.
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"The impact of rising interest rates has caused a slowdown in the global economy, which has in turn affected Hong Kong's foreign trade performance. Hong Kong's imports and exports of goods have continued to record double-digit year-on-year declines in volume," Shik said.
Financial Secretary Paul Chan Mo-po said in his Sunday blog that Hong Kong's overall economy remains on a path to recovery although growth will be slower.
"The recovery track is often bumpy and marked by ups and downs. The most crucial thing is to maintain an upward trend and keep moving forward," he said.
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To cope with the change, "We need more distinctive and creative marketing strategies and activities, better-quality products and services, and to explore new space for consumption growth ... to attract more residents and tourists to stay and enjoy their happy consumption experience in Hong Kong," Chan said.
Anthony Tran, senior strategist at Magpie Securities, said, "The drop in investment could be a reflection of weakening investor confidence. Hong Kong's economic growth is driven by exports and investment. ... While Hong Kong's reopening has been gradual, it is worth noting that the Hong Kong stock market, dominated by the Chinese mainland players, often overreacts to negative news from the mainland and underreacts to positive fundamentals. This creates opportunities for contrarian and value investors."
