The Hong Kong Special Administrative Region’s economy expanded 3.3 percent in the second quarter from a year ago, advance estimates of the government showed on Wednesday, as resilience in trade and investment outperformed weaker private consumption.
“Hong Kong’s second-quarter performance is in line with our expectations, where external demand has made a strong contribution to headline growth,” said Chim Lee, senior analyst at the Economist Intelligence Unit.
The expansion continued the growth trajectory of 2.8 percent year-on-year in the first quarter.
Granular data from the city’s Census and Statistics Department show that total exports of goods recorded an increase of 7.6 percent year-on-year in the second quarter.
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At the global level, inventory restocking cycle, solid electronics demand and stronger household and business demand are benefitting Hong Kong’s transshipment-related trade and logistics sector, as well as headline exports, Lee said. He forecast that goods trade via Hong Kong would grow by 10 percent year-on-year in 2024 in nominal US dollar terms.
Fixed investment rose by 6 percent in the second quarter over a year earlier. That compared with the first quarter’s 0.1 percent increase.
Government consumption saw an increase of 2 percent from April to June, reversing the trend of contraction in the first three months.
However, weak domestic consumption was a major drag. Private consumption expenditure decreased by 1.6 percent in the second quarter from a year earlier due to the changes in consumption patterns among residents and visitors, and the strength of the local currency.
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“On top of outbound tourism, residents are also spending more on daily necessities on the Chinese mainland, rather than in Hong Kong,” Lee said, adding that the fragile recovery of inbound tourism has further depressed retail performance.
Tourists traveling in Asia are more inclined to choose destinations where the exchange rates are weaker, such as Thailand and Japan, Lee said. The strong Hong Kong dollar against the Chinese yuan also made mainland tourists -— who account for the majority of inbound visitors — reluctant to travel to Hong Kong.
Terence Chong Tai-leung, executive director of the Lau Chor Tak Institute of Global Economics and Finance at the Chinese University of Hong Kong, nevertheless dismissed concerns over a weak retail sector.
“Hong Kong’s economic strength does not lie in the number of restaurants and retail stores. That’s not who we are. Basically, it’s because money is flowing back into finance and our exports are doing better,” said Chong.
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Chong said the city’s economic machine runs smoothly amid normal adjustments in the stocks and property markets, adding that the second half could be “more optimistic” given potential interest rate cuts.
Last year, Hong Kong’s economy recorded a slower-than-expected 3.2 percent growth, following a 3.5 percent contraction in 2022 from 2021.
For 2024, the government’s official full-year growth forecast is set between 2.5 percent and 3.5 percent.
Adam Ahmad Samdin, assistant economist at Oxford Economics, said he expects Hong Kong’s growth momentum to slow in the third quarter, and that economic activity this year is likely to remain soft overall.
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Echoing Lee’s remarks, Samdin said Hong Kong’s goods exports should remain resilient, but downside risks abound including heightening tariff-related geopolitical tensions and the lagged effects of monetary tightening.
As for the tourism sector, a strong Hong Kong dollar will likely prevent a meaningful pick-up, said Samdin, adding that private consumption “is likely to be flat” this year relative to 2023 due to the withdrawal of fiscal stimulus, and persistent weakness in the housing market.
