Hong Kong's 2012 GDP likely to fall 1.3%: DBS

Check out how each sector is likely to fare.

According to DBS, GDP growth is projected to accelerate to 2.1% YoY (1.6% QoQ sa), from 1.3% (0.6% QoQ sa) in 3Q. This brings full year growth to 1.3% YoY, down from 4.9% in 2011. 

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We expect private consumption – accounting for over 60% of GDP – to drive growth in 4Q. It is projected to speed up to 3.4% in 4Q from 2.8% in 3Q, in line with improving retail sales figures.

Retail sales values and volumes rose by 7.5% and 6.6% in 4Q respectively versus 5.9% and 4.2% respectively in 3Q. In particular, retail sales values quickened considerably in November and December (9.5% and 8.8% respectively).

This is primarily due to stronger tourist arrivals and the resulting boost in tourist spending growth to 9.3% in 4Q from 2.2% in 3Q. On the other hand, locals’ retail spending growth slowed to 6.7% in 4Q from 7.5% in 3Q based on total retail sales excluding popular tourist items.

Gross domestic fixed capital formation growth is projected to drop to 7.2% 4Q from 8.7% in 3Q, while government consumption is expected to expand 3.6% in 4Q versus 3.7% in 3Q.

On the trade front, nominal merchandise exports and imports growth picked up to 7.0% and 8.1% respectively in 4Q, from 3.8% and 4.5% in 3Q. Despite rosier numbers, the merchandise trade deficit has widened slightly (USD 17.4bn in 4Q vs. USD 15.6bn in 3Q), meaning the trade component did not contribute positively to growth.

Growth of real exports and imports of goods and services are projected to rise to 7.1% and 8.1% in 4Q from 3.1% and 4.0% in 3Q. Looking ahead, a possible eurozone contraction and sub-par US growth will be adrag on exports, but recovery in Asian demand (accounts for over 70% of exports) is expected to cushion the impact.

Meanwhile, a sustained rebound in China’s economy will support Hong Kong’s retail sales and subsequently private consumption. As such, private consumption is expected to be the primary driver of economic growth once again in 2013.

Hong Kong's GDP report will be announced Wednesday.