GDP forecast raised to 3.5%-4.5% after strongest first‑half in five years

Real GDP grew 5.1% in H1, with AI-related demand driving a 28.9% export surge. 

The Hong Kong government raised its GDP growth forecast for 2026 to 3.5%-4.5%, from an earlier estimate of 2.5%-3.5%, after the economy posted its strongest first-half performance in nearly five years.

Real GDP grew 5.1% year on year (YoY) in the first half, whilst second-quarter (Q2) growth slowed to 4.3% from 5.9% in Q1, according to the government's Half-yearly Economic Report 2026. 

On a seasonally adjusted quarter-on-quarter (QoQ) basis, however, GDP contracted 0.6% in Q2, reversing a 2.9% increase in the preceding quarter.

External trade was a major growth driver, with total exports of goods surging 28.9% year on year in real terms in the quarter, accelerating from 23.8% in Q1.

“The vibrant global demand for artificial intelligence-related electronic products is expected to continue supporting Hong Kong’s merchandise trade performance,” the government said.

Exports to mainland China continued to post double-digit growth, whilst shipments to Association of Southeast Asian Nations markets accelerated. 

Meanwhile, shipments to the US increased markedly, and those to the European Union recorded solid growth, the report added.

Goods exports rose a further 7% QoQ on a seasonally adjusted basis. Services exports increased 3.4% YoY, driven by stronger transport, financial, and other business services, as well as inbound tourism.

Private-sector investment recorded its third consecutive quarter of double-digit growth. Domestic investment climbed 4.4% in Q2, slowing from 18.3% in the previous quarter, largely due to weaker public-sector building and construction expenditure.

Investment in machinery, equipment and intellectual property products increased 23.6% YoY during the quarter. Meanwhile, private consumption expenditure grew 2.8%.

Meanwhile, the unemployment rate remained at 3.7% and the underemployment rate at 1.6%. Average monthly employment earnings of full-time workers, excluding foreign domestic helpers, increased by 2.3%.

The government maintained its 2026 inflation forecasts at 2.5% for underlying consumer price inflation and 2.6% for headline inflation, although it expects inflation to rise in the coming months as higher international oil prices feed through to domestic prices.

It flagged geopolitical tensions in the Middle East, global inflation, major central banks' policy paths, trade protectionism, and risks associated with rapid global AI investment as uncertainties to the outlook.