Hong Kong's Economy Turning The Corner?

by Mary Swire, Tax-News.com, Hong Kong

03 June 2002

Hong Kong's Government is sticking to its forecast of 1% growth for the current year after announcing that the economy grew 0.3% in the first three months of the year compared with the previous quarter. But GDP shrank 0.9% year on year in the first quarter, a testament to how badly Hong Kong has been affected by the global slowdown.

The previous quarter had shown a year-on-year 1.4% fall, and economists said the improvement was significant evidence that the recession had bottomed out.

Financial Secretary Antony Leung Kam-chung said: "It shows that economic activities in Hong Kong are kind of coming out from the recession," he said. "We are optimistic we can achieve our forecast of 1% this year as there are signs of improvement in a number of sectors, including tourism, re-exports and also activity in the property and stock markets."

Government Economist Tang Kwong-yiu however remained cautious: "Although there was certainly the pick-up in exports and the rather remarkable performance in inbound tourism and services related to trade, there is still weakness in investment and consumption as well."

"In the next few quarters gross domestic product will go up in a stable manner, not very fast, but of course we have to depend on external factors such as the pace of economic recovery in the US, the EU and Japan," Mr Tang said.

Other year on year comparisons were not particularly encouraging: consumer spending was down 0.6%, business investment down 16.5%, with spending on machinery and equipment down 25%. Export figures however were more hopeful, in line with higher trade figures reported last week, with exports of services up by 5.3% in the first quarter.

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