© Reuters. FILE PHOTO: Traffic is seen between office buildings at sunset in downtown Hong Kong, China June 29, 2017. Picture taken June 29, 2017. REUTERS/Bobby Yip
Hong Kong (Reuters) -Hong Kong’s economy grew 2.7% in the first quarter of 2023, John Lee, the leader of the Asian financial hub, said in a surprise announcement ahead of Tuesday’s 0830 GMT release of official data, to snap four consecutive quarters of contraction.
Although exports continued to decline in the first quarter, faster growth in the economy of mainland China, coupled with acceleration of Hong Kong’s aviation capacity, would provide further support, Lee said.
“GDP growth in the second quarter will be better than the first quarter,” he told a regular news briefing. “The economy this year will be better than last year.”
The latest quarterly figure compared to a 4.1% contraction in the last quarter, added Lee, who is Hong Kong’s chief executive.
Economists from Barclays (LON:) had expected a contraction of 0.9% in Q1 GDP, while Natixis and Bank forecast growth of 1.1% and 2.5%, respectively.
Battered by its own pandemic measures as well as spillover from China’s stringent “zero-COVID” policy, Hong Kong’s economy is expected to benefit this year from recovering consumer spending on the mainland and a rebound in travel.
All pandemic curbs have been lifted in the former British colony, where Lee has set priority on improving international competitiveness and attracting more overseas talent.
“Incoming data pointed to a recovery in the tourism and retail sectors, supporting the Hong Kong economy to return to the path of expansion for the year,” said Thomas Shik, chief economist at Hang Seng Bank.
“That said, the relatively weak trade performance suggested that a global slowdown continued to pose challenges to the growth outlook.”
Hong Kong also faces risks from high inflation and aggressive monetary tightening in advanced economies with higher borrowing costs and a pessimistic economic outlook hitting asset prices.
Its economy is expected to grow 3.5% to 5.5% this year after shrinking 3.5% in 2022, Financial Secretary Paul Chan said in a 2023/24 budget speech in February.
Barclays, Hang Seng Bank, DBS, Natixis and Standard Chartered (OTC:) forecast Hong Kong’s GDP to grow between 3% and 6.5% in 2023.
“Hong Kong’s economy is set to embrace a cyclical rebound of better household spending and China’s re-opening,” said Gary Ng, senior economist at Natixis Corporate and Investment Bank.
“However, the pressure from external trade and investment may continue to linger in the short run due to the downturn in the tech cycle and high-interest rates.”
