GDP growth forecast cut by 0.3 ppt to 4.5% as investment slows: Nomura

Private investment expanded 4.6% in Q2, down from 18.3% in Q1. 

Hong Kong’s 2026 GDP growth forecast has been cut to 4.5% from 4.8% after second-quarter (Q2) expansion slowed, and private investment weakened sharply, according to a Nomura report. 

The projection comes as the economy expanded 4.3% year-on-year in Q2, easing from 5.9% in the previous quarter and falling below the market consensus of 4.9%.

“Goods exports continued to strengthen, likely buoyed by strong global demand for artificial intelligence (AI)-related electronics, though net exports remained a drag,” the bank said.

“We believe part of the slowdown may reflect expectations of more unfavourable interest rate hikes from the US,” it added, noting that market expectations for Federal Reserve rate increases rose during the quarter.

On a seasonally adjusted quarterly basis, GDP contracted 0.6%, reversing the 2.9% expansion in Q1. Growth in gross domestic fixed capital formation, a measure of investment, also slowed to 4.6% from 18.3%.

Still, Nomura expects private investment growth to remain steady in the near term, saying stabilising US-China relations could help to improve business sentiment.

Private consumption remained the main contributor to economic growth, although growth slowed to 2.9% from 4.9%. It contributed an estimated two percentage points to headline GDP growth.

The bank attributed the continued rise in consumption primarily to recoveries in Hong Kong’s financial and residential property sectors, with the local financial industry expected to continue supporting household wealth and consumer sentiment.

Goods exports rose 28.8%, accelerating from 23.8% and marking the fastest growth since Q1 2021, driven by global demand for AI-related electronics.

Meanwhile, goods imports increased 29.3%, whilst services exports and imports grew 3.4% and 2.8%, respectively. 

Net exports remained a drag on the economy, subtracting an estimated 1.5 percentage points from GDP growth, compared with an 8.8-percentage-point drag in the previous quarter.

A large share of net goods imports likely remained in inventories, which contributed an estimated 2.9 percentage points to Q2 growth, Nomura said.