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| No.5 May, 2010 |
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Hong Kong's first quarter GDP grew 8.2% |
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 Hong Kong's Gross Domestic Product grew 8.2% in real terms in the first quarter, of 2010, having resumed positive year-on-year growth of 2.5% in the previous quarter.
On a seasonally adjusted quarter-to-quarter comparison, GDP rose 2.4% in real terms in the first quarter - the fourth consecutive quarter-to-quarter expansion.
Government Economist Helen Chan said with the Hong Kong economy bouncing back for four quarters in a row, by the first quarter this year GDP had largely returned to its early 2008 peak, recouping all the lost ground in the 2009 financial turmoil.
Given the strong growth momentum in Hong Kong and the region, and if no major external shocks occur, real GDP growth for 2010 as a whole will very likely exceed the forecast of 4% to 5% as announced in the Budget, she said.
However, recognising the prevailing uncertainties in the external environment, the forecast GDP growth is being maintained in the current round.
She added a further review will be conducted in the August round when more data from both the global and Hong Kong economy is available.
Exports, consumption
In the first quarter merchandise exports rebounded strongly from the exceptionally low base in the same quarter last year, thanks to vibrant growth on the Mainland, the resurgence in intra-regional trade and a gradual return of import demand from the US and Europe.
"For the first quarter as a whole, exports surged 21.6% in real terms over a year earlier, and had by and large returned to the level prior to the global financial tsunami," she said.
Exports of services were likewise robust, up 17.9% year-on-year in real terms in the first quarter.
Exports of financial and business services continued to thrive along with the surge in the financial market and commercial activities. Transportation and trade-related services staged a visible turnaround on the reviving trade flows. Inbound tourism was likewise vibrant, with visitors from most major sources showing rapid growth.
The local segment was highly resilient in the first quarter, with private consumption expenditure up 6.5% year-on-year in real terms amid the improving labour market, with the Government's relief measures providing additional support. The distinctly low base of comparison in the same quarter last year was also relevant.
Business sentiment continued to strengthen, with overall investment spending seeing another quarter of double-digit growth at 10.5%.
Job, income prospects
The seasonally adjusted unemployment rate has successively come down since mid-2009 to 4.4% in the first quarter of 2010. Wages and earnings in overall terms also rose towards the end of last year.
The stock market turned more volatile recently, as sentiment was heavily dominated by market concerns over rising fiscal deficits and public debt in a few European economies.
The property market gained further momentum during the first quarter but has steadied due to Government measures to ensure its stable and healthy development.
Locally, the results of the latest Quarterly Business Tendency Survey conducted in March and early April confirmed a broad-based rise in optimism among the large enterprises surveyed, and an increasing number of firms have indicated their intention to reactivate hiring plans.
"Better job and income prospects should in turn render the key driver for consumption growth in the quarters ahead. Investment as a whole should show further growth, with private sector investment recovering further in addition to the expected pick-up in public sector works," Mrs Chan said.
Fragile recovery
Externally, the global recovery proceeded well in the first quarter, with Asia taking the lead while the US economy also churned out a better-than-expected performance.
However, the European economies are still sluggish under the drag of high unemployment and huge fiscal deficits. The Greek sovereign-debt problem and the need for some European economies to implement austerity measures may pose a drag to the recovery in Europe and increase financial market volatility.
Given the latest developments in the external environment, and the already fragile nature of the global recovery, Mrs Chan said the export outlook for Hong Kong has turned somewhat more uncertain, more so in the latter part of the year upon the waning of the exceptional fiscal boosts in the advanced economies.
Consumer prices
Consumer price inflation, which was once negative for several months last year, inched up in the first quarter of 2010.
Underlying consumer price inflation was 0.8% in the first quarter, up from -0.1% in the preceding quarter.
"Looking ahead, inflation may creep up modestly further in the coming quarters, being part of the reflationary process as the economic recovery proceeds," Mrs Chan said.
"With the movements of consumer prices so far largely in line with earlier expectations, the forecast rates of the headline and underlying consumer price inflation this year as a whole remain unchanged at 2.3% and 1.5%."
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