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1 June, 2005 Prospects of Hong Kong's Economy |
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In the first quarter this year, Hong Kong economy registered real growth rate of 6.0%, nominal growth rate of 4.0%, and seasonally adjusted QoQ growth rate of 1.5%, beating forecasts from every possible angle. Moreover, growth has remained strong and broad-based. The combination of private consumption, investment and government expenditure contributed 2.7 percentage points to growth. Net exports plus inventory contributed another 3.3 percentage points. Buildings and construction investment reversed years of downtrend and lean inventory are also favorable signs of momentum enjoyed by domestic consumption and investment.
In the second quarter, although the comparison basis was higher, economic data so far support the notion of ongoing healthy recovery. For the first five months of this year, exports grew 11.4%, retail sales and retail volume increased by 8.2% and 7.4% respectively. The unemployment rate declined to 5.7%, a four-year low level, while inflation still not yet breached the modest 1.0% threshold.
Looking forward to the second half of this year, Hong Kong faces a number of uncertainties, including the cyclical slowdown of the global economy, terrorist attacks, rising oil price, US rate hikes, and a resurging dollar, etc. Besides, interest rates in Hong Kong are likely to follow the US counterparts after the HKMA's introduction of three new measures to the Currency Board System. The exports growth is also likely to moderate because of the slowing regional trade and growing trade protectionism. Continuous speculations on the RMB might also dictate the capital flows.
Nonetheless, Hong Kong is believed to be able to withstand all these challenges. Growth in the second half will probably take on the characteristics of strong domestic demands which should offset the sagging external demands, i.e. trade. High consumption and investment confidence, stable political atmosphere, positive wealth effects from both the stock and property markets, Disneyland and China factors are all favorable elements that can offset the above mentioned uncertainties. Therefore, we raises its full year Hong Kong's real GDP growth estimate from 4.5% to 5.0%. And towards the end of this year, unemployment rate should improve further to 5.3% and the full year inflation should remain modest at 1.2%.
Hong Kong 2005 Real GDP Growth Forecast (%)
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Forecast （Dec. 2004） |
Forecast (Revised) (June 2005) |
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Private consumption expenditure |
4.2 |
4.2 |
Government consumption expenditure |
1.0 |
-3.0 |
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Gross domestic fixed capital formation |
4.5 |
4.5 |
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Of which﹕ Building and construction |
1.5 |
1.5 |
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Machinery Equipment and Computer software |
7.3 |
7.3 |
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Total exports of goods |
8.6 |
8.6 |
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Domestic exports |
4.8 |
-10.0 |
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Re-exports |
8.8 |
9.8 |
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Imports of goods |
8.8 |
8.1 |
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Exports of services |
10.5 |
9.5 |
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Imports of services |
6.9 |
6.9 |
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Gross Demostic Product |
4.5 |
5.0 |
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GDP deflator |
-0.5 |
-0.5 |
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CCPI |
1.2 |
1.2 |
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Unemployment rate |
5.8 |
5.3 |
Source﹕Census & Statistics Department, BOCHK Research
