Hong Kong Lifts GDP Outlook For 2009 On Strong Q2 Growth

Hong Kong’s economy emerged from the worst recession in the second quarter, prompting the government to raise the outlook for this year.

Gross domestic product or GDP rose 3.3% sequentially in the second quarter after falling 4.3% in the first three months of the year, a preliminary report released by the Census and Statistics Department showed Friday. That was the first increase following declines in four consecutive quarters. Economists had forecast GDP to grow 1.2%.

On an annual basis, the economy contracted 3.8% in the second quarter, significantly slower than the 7.8% decline in the first quarter and the expected 5.3% fall.

Hong Kong’s Financial Secretary, John Tsang said the strong and forceful stimulus measures by the Mainland Authorities helped the Chinese economy regain faster growth momentum, thereby benefiting the Hong Kong economy.

China’s economy grew at a faster pace in the second quarter after rising at the slowest pace on record in the first quarter. GDP grew 7.9% year-on-year in the second quarter, faster than the 6.1% growth in the first quarter.

He added that the confidence exhibited by the Hong Kong people despite the tremendous shocks of the global financial tsunami has been very important for the recovery.

“I am glad that the strategy of the government to stabilize the financial system, support enterprises and preserve employment has yielded positive results in supporting the economy and helping to slow the rise in unemployment,” Tsang said.

Private consumption recovered by growing 4% in the second quarter from the first quarter. Government expenditure rose 1.5%. Exports of goods grew 11.6% and imports climbed 10.9%.

Asian economies are apparently emerging strongly from the recession. Singapore grew 20.7% in the second quarter, reversing a 12.2% contraction in the first quarter.

In Europe, preliminary reports showed that Germany and France exited recession in the second quarter, while Spain and U.K. continued to shrink. Meanwhile, the 16-nation Eurozone remained in contraction in the second quarter.

Given the strong rebound in the second quarter, the gradual bottoming out in the global economy, and also taking into account the boost from the stimulus measures announced in May, the government revised its economic outlook for 2009. It now predicts the economy to contract by 3.5%-4.5% in real terms this year, up from 5.5%-6.5% decline forecast in May. Most private sector analysts are currently projecting the economy to contract by 3.5%-5.5%.

“We are seeing encouraging signs of an economic recovery and the economy will hopefully improve further in the second half of the year,” Tsang said.

However, he pointed out, “As the global economy is still subject to uncertainties, we cannot afford to be complacent. While continuing with the strategy of stabilizing the financial system, supporting enterprises and preserving employment, the government will remain vigilant and make timely moves in response to the evolving external situation.”

The government forecast underlying consumer price inflation at 0.9%, same as in May. Taking into account the effects of the relief measures announced in May, the headline consumer price inflation for 2009 is forecast at 0.5%, revised down from 1% predicted in May.