Hong Kong's GDP predicted to edge higher to 1.8%

Thanks to a more stable mainland economy.

On January 28, Financial Secretary Paul Chan Mo-po said that 2016 fourth-quarter gross domestic product (GDP) growth, which is due for release on February 22 when he delivers the Budget 2017/18, should outpace the annual growth rate of 1.9% recorded for the third quarter, according to Hang Seng Bank's Economic Monthly report. He also predicted that 2016 full-year growth would exceed the government’s estimate of 1.5%.

His comments suggest that growth momentum picked up over recent months and also are in line with data showing an improved outlook for the Hong Kong economy.

Here's more from Hang Seng Bank:

The pace of the year-on-year decline in retail sales volume narrowed to 2.8% in December from a low of 11% in August, partly reflecting both a rebound in the number of tourist arrivals and the improved sentiment regarding global growth prospects following Donald Trump’s US presidential election victory.

Trade growth has also returned to positive territory after about two years of decline.

Exports of goods rose by an annual rate of 8.1% in November and 10.1% in December after falling by 1.8% in October. Imports have followed a similar pattern, jumping by 8.7% in December after being flat in October.

We expect Hong Kong’s GDP growth to pick up to 1.8% in 2017, with further economic recovery in advanced countries, most notably the US, and the stabilisation of the mainland China economy.

While the US Federal Reserve is on track to tighten monetary policy, the existing low interest rate environment in Hong Kong should continue given the current large size of the aggregate balance – a measure of interbank liquidity – in the interbank market.