HONG KONG (Aug 8): Hong Kong’s economic growth in the second quarter probably cooled from its fastest annual pace in six years but the city will still post a solid performance due to recovering domestic demand, a buoyant stock market and booming property sector. The Chinese-ruled city started 2017 on a strong footing and economists are optimistic about the near-term outlook, boding well for Hong Kong’s new leader, Carrie Lam. The $270 billion trade-reliant economy was forecast to expand 3.48 percent in the April-June quarter from a year earlier, according to the average estimate of six analysts surveyed by Reuters. The economy grew 4.3 percent in the first quarter – its fastest pace since the second quarter of 2011.
The economy would grow a seasonally adjusted 0.8 percent, according to the average of three forecasts, compared with 0.7 percent in the March quarter. “The economy is strong across the board with exports doing quite well. Consumer spending remains strong, while property and the stock market have been strong,” said Paul Tang, chief economist at Bank of East Asia, who expects growth to remain solid in the second half of the year. A strong first-half performance means the economy is more likely to meet the government’s 2-3 percent GDP estimate for 2017. Second quarter GDP data is due on Friday at 0830 GMT.
In comments that could signal a policy shift for the financial hub, Chief Executive Lam said this month that she supported a call by Executive Councillor Joseph Yam, Hong Kong’s former central bank chief, to adopt a less rigid fiscal regime to allow for budget deficits in a bid to boost the economy. Yam, a top adviser to Lam during the leadership race this year, said in his blog that the government should not be afraid to ramp up spending, even if it meant going into deficit. The territory, which returned to Chinese rule in 1997, has been grappling with prolonged weakness in retail sales due mainly to a drop in mainland Chinese tourists. The trade-dependent city has also been hit by China’s slowdown due to close trade, tourism and financial links. But retail sales in June rose for the fourth straight month after two years of decline, while the drag from tourism receded. Meanwhile, property prices have continued to scale fresh peaks in spite of a series of tightening measures by the government to cool the market, making homeowners feel more wealthy and in turn boosting consumer sentiment. Hong Kong’s stock market has also been on a tear, rising nearly 30 percent so far this year to hover around its highest in more than two years. Other indicators also show the city is holding up well. The private sector grew at its fastest rate in nearly 3-1/2 years in July, driven by stronger output and new orders, an industry survey showed. Hong Kong’s June exports also rose 11.1 percent on year, marking the fifth consecutive month of growth.
