Hong Kong economic growth forecast down 5%

The growth moderation was caused mainly by a sharp drop in exports towards the end of the quarter.

Financial Secretary John Tsang has adjusted the forecast for this year’s economic growth to 5% - the lower end of August’s forecast of 5% to 6%.

Speaking at the Legislative Council Financial Affairs Panel meeting Monday, Mr Tsang said total goods exports slackened in the third quarter to a 2.2% decline in real terms over a year earlier – the first fall since Q4 2009.

The Hong Kong economy grew 4.3% in real terms in Q3 over a year earlier - down from 5.3% growth in Q2.

He said the growth moderation was mainly caused by a sharp fall-off in exports towards the end of the quarter amid an increasingly austere global economic environment. The domestic sector was resilient throughout the quarter, though, providing a cushion for overall economic performance.

Domestic demand and inbound tourism are expected to hold up better. This, coupled with ongoing infrastructure investment, should also provide a cushion against the expected setback in external trade in Q4.

Mr Tsang revised the economic growth forecast having taken into account the 5.6% Gross Domestic Product growth in the first three quarters, and the lacklustre export performance in Q4. He now expects the economy to grow by 5% for 2011 as a whole - the lower end of the August forecast of 5% to 6%.

The continued easing-back in global food and commodity prices in recent months is a positive development, he says, which should help alleviate imported inflation. He noted, though, that the lagged effects from the earlier surge in market rentals is likely to nudge inflation up in the near term before peaking out.

Judging from the actual outturn so far and the latest trend in global food prices, the forecast rates of headline and underlying consumer price inflation for 2011 as a whole are marked down slightly to 5.2% and 5.3%, from 5.4% and 5.5% in the August round.