Hong Kong’s economy likely to grow 9.8% in Q2: MS

This is thanks to a low base year and growing external demand.

Hong Kong is expected to register a 9.8% gross domestic product (GDP) growth in the second quarter of the year (2Q21), sustaining its performance in the first quarter (1Q21) when its economy expanded by 7.9%, Morgan Stanley projected.

The 9.8% year-on-year (YoY) growth is forecast on the back of a low base of comparison and the strong external demand and capital expenditure that offset the “sluggish” consumption recovery.

“Hong Kong’s real GDP growth has likely picked up further to 9.8% YoY in 2Q21 (vs. 7.9% in 1Q21), and its 2Y Compound Annual Growth Rate (CAGR) may have also improved to 0% (vs. -1% in 1Q),” Morgan Stanley said in a report.

“External demand has remained the key growth engine, which may have provided support to CAPEX for machinery equipment.”

This comes ahead of the announcement of the Census and Statistics Department (C&SD) of its advanced GDP estimates on 30 July.

Hong Kong’s economy expanded 7.9% in 1Q21, ending six consecutive quarters of contraction.

The C&SD attributed the rebound to the strong performance of external trade as well as the low base of comparison in 2020.

Read also: Hong Kong GDP revised slightly up to 7.9%

“Meanwhile, domestic private consumption has also improved at the margin, with retail sales growth narrowing the decline on a 2Y CAGR basis (-16.2% in April-May vs. -17.8% in 1Q21), on the back of gradual job market recovery,” the report noted.

In addition, the seasonally adjusted unemployment rate has also come down to 5.5% in June from a post-2004 high of 7.2% in February.

Read also: Jobless rate drops to 5.5% in June as economy rebounds

Financial Secretary Paul Chan, likewise, said the GDP continues to grow, but raised that difficulties in some sectors persist even as the economy recovers.

“The economy ended the recession of six consecutive quarters in 1Q this year and recorded a 7.9% growth. This growing trend keeps going,” the Secretary said in his blog.

“Nonetheless, even if the overall economy is turning better, many sectors are still facing difficulties and many people's lives are still under great pressure.”

On this note, he appealed that Hong Kong continues its anti-COVID-19 measures and asked Hong Kongers to get vaccinated.