Hong Kong economy grew at the slowest pace in 2Q12 since 2008

The economic growth forecast has then been reduced to 1% to 2% for the year.

The government said the economy grew at the slowest pace in the second quarter since the 2008 financial crisis, forcing it to cut its full-year GDP growth estimate to 1% to 2% from the previous 1% to 3%.. The economy grew 5% in 2011.

Some analysts believe it might be too much aiming for growth in the second half considering Hong Kong’s slumping exports and the deteriorating situation in the Eurozone.

Hang Seng Bank, which has revised its GDP growth forecast to 2% from 3%, said that the softness in coincident indicators and persistent external headwinds warn against expecting too sharp a rebound.

"If our forecast for a full year growth of 2% is to be realized, the pace of growth would have to accelerate to over 3% in the second half."

Government Economist Helen Chan sounds less optimistic about achieving the goal of 1% to 3% GDP growth. She pointed out the unnerving debt crisis and persistently unsteady U.S. economic recovery will continuously weaken Hong Kong's growth in the remaining months. As a result, the overall business sentiment has turned more cautious in the city.

Chan said as real economic growth in the first half only rose 0.9% year-on-year, and the downside risks on the external front have risen when compared to the last review three months ago, the economy is poised to attain only a modest growth this year.

Economic data for the second quarter is unsettling with exports inching forward by just 1.1% year-on-year due to sluggish merchandise exports amid external headwinds. The renewed deterioration of the European debt crisis since May has further dampened global economic sentiment, to the detriment of Hong Kong’s growth.

"Although external demand is set to worsen in the coming months, the resilience of the city's domestic economy should provide sufficient counterbalance for Hong Kong to avoid recession this year," said Donna Kwok, Greater China economist from HSBC.

Hong Kong’s real Gross Domestic Product grew 1.1% in the second quarter over a year earlier, after a mild 0.7% rise in the first quarter, which was revised upwards from the earlier estimate of 0.4%.

Seasonally adjusted real GDP fell 0.1% in the second quarter, following a 0.6% rise in the first quarter, which was also revised up from the earlier estimate of 0.4%.

Hong Kong’s total exports of goods fell 0.4% year-on-year in real terms. Overall exports of services rose 2.1% year-on-year in real terms. Private consumption expenditure grew 3.7% in real terms over a year earlier, and investment spending grew 5.7%.

The seasonally adjusted unemployment rate came down to 3.2% in the second quarter. The median household income rose 5.1% in nominal terms over a year earlier, or 0.9% in real terms after discounting inflation. Over the same period, lowest decile full-time employees’ average employment earnings rose 10.4% in nominal terms or 6.4% in real terms.

Chan said the local stock market plunged in May but recouped some lost ground in June, while the local property market turned quieter, with more moderate price rises and thinner transaction volume towards the end of the second quarter.