HONG KONG: Strong consumption, as well as frothy stock and real estate markets likely bolstered Hong Kong’s economic growth in the fourth quarter, but higher U.S. interest rates and easing China capital inflows may pose broader risks to growth this year.
With the economy showing signs of moderation, the government will probably announce short-term relief measures and capital spending initiatives to sustain growth in an expansionary budget on Wednesday, local media reported.
As one of the most open and free economies in the world, Hong Kong’s growth is highly reliant on capital, trade, tourist and investment flows from China. A surge in domestic spending, a rise in visitors from the mainland and improved retail spending helped ramp up GDP last year after a difficult 2016.
“We think private consumption is likely to remain resilient on the back of stable growth,” wrote HSBC economist Kelvin Lam. “More specifically, the retail sector, one of four main pillars of the Hong Kong economy, will likely continue to be supported by the recovery in tourist arrivals and stable domestic demand.”
Six economists surveyed by Reuters expected fourth quarter growth of 3.2 percent from a year earlier, down from 3.6 percent in the July-September quarter. The economists did not provide quarterly forecasts. The third quarter expanded a seasonally adjusted 0.5 percent.
The still-solid momentum in the final quarter will bring full-year growth to an estimated 3.7 percent – the fastest since 2011 – and up from 1.9 percent growth in 2016.
The former British colony has seen brighter economic data in the past few months as buoyant markets helped boost consumer spending, prompting the government to raise its full-year growth outlook to 3.7 percent late last year.
Economists forecast the financial hub’s growth to ease in 2018 to 3.1 percent. GDP figures are due at 0300 GMT on Wednesday, along with the budget for the 2018/19 financial year.
