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Hong Kong's Economy Outperforms In Q3

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

22 November 2006


Hong Kong's economy gathered strong momentum in the third quarter, with GDP expanding at a brisk 6.8% in real terms, up on a 5.5% rise in the second quarter, Acting Government Economist Helen Chan announced on Tuesday.

The figure represents the twelfth consecutive quarter of of above-trend growth since the current upturn began in mid-2003, Chan said.

The surprisingly strong growth rate in the third quarter means that the forecast GDP growth for 2006 as a whole has been revised up from 4-5% to 6.5% in the current update.

Merchandise exports saw faster growth of 8.9% in real terms in the third quarter over a year earlier, thanks to thriving trade flows in the Mainland and the renewed weakening of the US dollar in recent months.

Exports of services likewise grew strongly, by 8.6% in real terms, along with vibrant offshore trade and buoyant financial market activities.

The fast pace of growth in mainland China coupled with its surging trade flows will continue to provide the main impetus to Hong Kong's trade growth, Chan said.

Hong Kong's external trade looks set for further growth in the fourth quarter, particularly with the additional boost from a weak US dollar, she predicted.

The official explained that rising local consumer spending amidst improving employment income, expanding job opportunities and a buoyant stock market have also boosted the GDP figures, as did a more stable property market, together with the pause in interest rate hikes.

Overall investment spending accelerated markedly to double-digit growth at 12.7% in real terms in the third quarter over a year earlier, marking the fastest growth since the fourth quarter of 2000. Machinery and equipment investment, which surged by 22.4%, was the key driver of overall investment growth, reflecting strong business confidence, Chan noted.

The overall growth rate was achieved within the context of low inflation, which the government expects to continue moderating through to the end of the year as oil prices ease and labour productivity gains are felt. The forecast rate of increase in the Composite CPI for 2006 as a whole is maintained at 2%.


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