Economy rebounds at 2.7% in Q1

Led by the strong recovery of inbound tourism and domestic demand, Hong Kong’s economy improved visibly in the first quarter of 2023, as real gross domestic product (GDP) resumed growth at 2.7% from a year earlier.

Government Economist Adolph Leung made the statement when presenting the city’s latest economic figures at a press conference today.

On a seasonally adjusted quarter-to-quarter comparison, real GPD surged by 5.3% in the first quarter.

Total exports of goods plummeted further by 18.7% year-on-year in real terms in the first quarter amid the challenging external environment. Exports to the Mainland, the US and the European Union continued to fall notably.

On the other hand, services exports expanded visibly by 16.5% year-on-year in real terms, with exports of travel services leaping more than six-fold thanks to the resumption of normal travel with the Mainland and the rest of the world.

Domestically, private consumption expenditure surged by 13% in real terms in the first quarter from a year ago, as consumption sentiment improved sharply, along with the removal of anti-epidemic measures in both Hong Kong and the Mainland.

Overall investment expenditure reverted to 5.8% growth amid an improved economic outlook.

The labour market saw continuing improvement as the seasonally adjusted unemployment rate dropped further from 3.5% in the fourth quarter of 2022 to 3.1% in the first quarter of 2023.

Looking ahead, Mr Leung said inbound tourism and domestic demand will remain the major drivers of economic growth this year.

“Visitor arrivals should recover further as transportation and handling capacity continue to catch up. The improving economic situation and prospects should boost domestic demand, though tight financial conditions will remain a constraint.

“The continued improvement of the labour market, the disbursement of consumption vouchers and a series of ‘Happy Hong Kong’ events will provide additional support to private consumption.”

Mr Leung further pointed out that exports of goods will continue to face significant challenges, and that the recent banking sector stress in the US and Europe also added uncertainties to the global economic outlook.

Taking into account the actual outturn in the first quarter and all preceding factors, real GDP growth forecast for the whole of 2023 is maintained at 3.5% to 5.5%, the same as announced in the Budget.

Forecasts for underlying and headline consumer price inflation for 2023 are maintained at 2.5% and 2.9% respectively.