Hong Kong economy struggles in 1st quarter as global uncertainty weighs down Asian trade hub

HONG KONG – Hong Kong’s economy grew slightly in the first quarter as the trade-dependent Asian financial centre was held back by an unsteady global demand.

While conditions have improved since last year, the outlook was still clouded by problems in debt-mired Europe and an uncertain recovery in the United States, government economists said Friday.

Economic output in the southern Chinese city grew a meagre 0.2 per cent in the first three months of the year compared with the previous quarter. It was the slowest growth in three quarters.

On a year-on-year basis, gross domestic product grew 2.8 per cent, unchanged from the previous quarter’s growth rate.

Exports grew 8.8 per cent thanks to “solid growth” in mainland China and other Asian markets. A “peculiar” surge in experts of gold jewelry also helped boost the export figures, the government said. Mainland Chinese have been buying up gold jewelry recently in Hong Kong, where there is no sales tax, after prices for the precious yellow metal fell.

However, advanced economies remained weak, with exports to major markets including the U.S., European Union and Japan all posting declines during the first quarter.

“In view of the continued sluggishness in demand in the advanced economies, which would continue to put a drag on economic activity in Asia, Hong Kong’s trade performance is likely to see some fluctuations in the period ahead,” government economist Helen Chan said.

Chan said the government is maintaining its full-year growth forecast of 1.5-3.5 per cent.

Gareth Leather of Capital Economics wrote in a commentary that a “sustained a robust recovery in Hong Kong looks highly unlikely” because of expected disappointing growth in the U.S., Europe and China.

The former British colony of Hong Kong has been a semiautonomous region of China for 15 years. Its economy has flourished because of open markets and a busy port handling a big share of goods from China, but those factors also leave it highly vulnerable to the fluctuations of global trade.