Hong Kong’s real GDO growth likely to accelerate to 2.2 pct y/y in 2017, says Scotiabank

The economic outlook of Hong Kong is rebounding gradually. Exports are improving, boosted by demand from China and elsewhere in Asia, noted Scotiabank in a research report. China continues to shape Hong Kong’s economic prospects given that about half of the country’s exports are shipped to mainland China and its retailers rely on mainland tourists’ shopping appetite.

Moreover, household consumption is expected to continue to be a vital source of growth in Hong Kong. Consumer spending is underpinned by wage growth that indicate tight labor market conditions. The economy is close to full employment with the jobless rate at 3.2 percent in March. However, higher local interest rates are expected to hurt consumption growth slightly in the months ahead. Hong Kong’s property investment is likely to decelerate in 2017 but it is expected to be countered by public sector infrastructure outlays.

“Hong Kong’s real GDP growth will likely pick up to 2.2 percent y/y in 2017 and 2.4 percent in 2018 following a 1.9 percent gain last year”, added Scotiabank.

Meanwhile, the Hong Kong Monetary Authority hiked its Base Rate by 25 basis points to 1.25 percent, reflecting the interest rate rise by the U.S. Federal Reserve in mid-March. Hong Kong’s consumer prices had risen 0.5 percent year-on-year in March. Base effects are expected to accelerate inflation rate temporarily to 1.75 percent year-on-year before mid-2017, stated Scotiabank.