Hong Kong Raises 2017 Growth Outlook

Hong Kong's growth outlook for 2017 was upgraded as the actual growth outturn in the first half of the year was stronger than expected amid receding downside risks in global environment.

In the first half of 2017, the economy grew 4 percent, the government said Friday. The real growth outlook for 2017 was revised up to 3-4 percent from 2-3 percent estimated in May.

Driven by external and domestic demand, gross domestic product expanded 3.8 percent year-on-year in the second quarter. However, this was slower than the 4.3 percent increase registered a quarter ago.

Sequentially, the economy grew at a faster pace of 1 percent after rising 0.7 percent in the first quarter.

Exports of goods registered an annual growth of 5.6 percent and services exports advanced 2.3 percent in the second quarter on the back of increased cross-border financial activities and reviving regional trade flows.

Domestic sector continued to display strength, Deputy Government Economist, Andrew Au, said. Private consumption expenditure grew 5.3 percent. At the same time, government expenditure maintained steady growth of 3.2 percent.

Overall investment spending in terms of gross domestic fixed capital formation strengthened to show a growth of 8 percent in the second quarter.

Looking ahead, the government economist said receding downside risks to the outlook as well as growth momentum in the Mainland economy should be conducive to the near-term performance of Hong Kong's exports.

"However, there is still a need to stay alert to the uncertainties in the external environment, including the pace of US monetary policy normalization, policy differences among major central banks and Brexit-related negotiations," the economist said.

Chang Liu, an economist at Capital Economics, said GDP growth will slow in the second half of the year as the recent strength in capital spending won't last. Moreover, the city's overheated property market remains a major concern, Liu added.

In the second quarter, the underlying inflation rate was 2.0 percent and averaged 1.7 percent in the first half of the year.

As actual inflation outturns so far this year have been somewhat lower than expected, the forecast rates of underlying and headline consumer price inflation for 2017 as a whole, were revised slightly downwards to 1.8 percent and 1.6 percent, respectively.