Hong Kong GDP Growth Expected To Meet Budget Predictions

by Mary Swire, for LawAndTax-News.com, Hong Kong

23 August 2006

The SAR's economy continued to grow in the second quarter, with GDP rising 5.2% in real terms, following exceptionally strong growth of 8% in the previous quarter, Government Economist Kwok Kwok-chuen announced on Tuesday.

This marked the 11th consecutive quarter that GDP growth exceeded the average trend growth of 3.9% in the past decade.

Mr Kwok went on to add that given the outturn so far and with expected expansion in the second half, Hong Kong's economy should easily attain GDP growth of 4%-5% as forecast in the Budget.

Barring any abrupt adverse changes in the external environment, GDP growth for the year is likely to be close to 5%, the upper end of the range forecast, Mr Kwok predicted.

When compared with the first quarter, external trade was less buoyant. Merchandise exports, having attained continuous strong growth over the past three years, grew more moderately in the second quarter, by 6.4% in real terms over a year earlier.

However, the vibrant Mainland economy has helped to cushion the impact of weaker performance in other markets. Services exports maintained notable growth momentum, up 8.6% in real terms, bolstered by continued growth in offshore trade and vibrant inbound tourism.

Domestic demand also held up well, with private consumption expenditure growing 5% in real terms, alongside improving employment conditions. This improvement occurred despite large volatilities in the stock market in May and June.

Overall investment spending rose 4.3% in real terms, with the continued rise in spending on machinery and equipment, at 12.8%, more than offsetting the 6.4% decline in building and construction spending.

A further improvement was seen in the labour market, with the seasonally adjusted unemployment rate edging down to 5% in the second quarter and to 4.9% in the May-July period, the lowest in nearly five years.

Consumer price inflation, though notching up to 2% in the second quarter, remained benign. Looking ahead, overall inflationary pressures are likely to stay moderate, kept down by rising productivity and capacity expansion from hefty business investment.

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