In this Aug 16, 2023 photo, the skyline of Hong Kong Island can be seen across Victoria Harbour as tourists throng the Tsim Sha Tsui promenade in Hong Kong to enjoy a sunny afternoon. (SHAMIM ASHRAF / CHINA DAILY)

HONG KONG – The Hong Kong Special Administrative Region government on Friday cut its full-year forecast for gross domestic product (GDP) growth to 3.2 percent, down from between 4 and 5 percent previously, given weaker-than-expected growth and a challenging near-term outlook. 

The downgrade followed revised data on the same day showing Hong Kong’s economy grew 4.1 percent in the third quarter from a year earlier. On a quarter-to-quarter basis, GDP edged up 0.1 percent from the April-to-June period. Both figures failed to meet expectations. 

“The poor external environment was a major factor contributing to the worse-than-expected performance in the third quarter,” said government economist Adolph Leung Wing-sing. 

“Rising geopolitical tension, high interest rates in developed economies, and sluggish external demand had a direct impact on export performance, as well as on local consumer sentiment.”

While domestic business costs might face some upward pressures as the economy continues to revive, it should remain contained in the near term.

Adolph Leung Wing-sing, Government economist 

It also took time for traders to adapt to the changes in consumption patterns and requirements of the public in the aftermath of the pandemic, Leung added. 

Total exports of goods dropped by 8.6 percent year-on-year in the third quarter, further to the fall of 15.1 percent in the preceding quarter. Declines were recorded in major markets including the Chinese mainland, the US and the European Union.

“Looking ahead, the difficult external environment amid increasing geopolitical tensions and tight financial conditions will continue to weigh on exports of goods and investment and consumption sentiment,” Leung said. 

Looking on the bright side, inbound tourism and private consumption will continue to underpin economic growth for the rest of the year, Leung said. 

“More visitors could be expected as handling capacity recovers further. As regards private consumption, continued improvement in household income and the government’s various support initiatives including “Night Vibes Hong Kong” should provide support,” he said. 

In mid-September, Hong Kong kicked off s nightlife campaign to revitalize its after-hours business. The campaign, which involves food stalls and a string of night markets as well as live shows, is a key part of the government’s efforts to stimulate consumption amid a lackluster economic growth outlook.

Since its launch, The  “Night Vibes Hong Kong” campaign has attracted positive feedback from residents and tourists, Deputy Financial Secretary Michael Wong announced in a written reply to the Legislative Council this week. 

In respect of night-time events organized by government departments, the lantern carnivals held during the Mid-Autumn Festival recorded an accumulated attendance of around 660,000, with more than 300,000 visiting the lantern carnival at Victoria Park, according to Wong. 

Overall inflation is expected to stay moderate in the near term. The SAR government lowered the underlying inflation forecast for the year to 1.8 percent from an earlier estimate of 2.2 percent. 

“External price pressures are expected to soften further. While domestic business costs might face some upward pressures as the economy continues to revive, it should remain contained in the near term,” Leung said.