HK economic growth slows down in second quarter amid weakened external environment

Hong Kong's economic growth has slowed down in the second quarter compared to the first quarter, due to the continuous pressure the exports of goods are facing amid the sustained weakness of the external environment.

According to the latest figures released by The Census and Statistics Department (C&SD), the city's gross domestic products (GDP) increased by 1.5% in real terms in the second quarter of 2023 over a year earlier, compared with the increase of 2.9% in the first quarter. 

The continuous expansion in GDP in the second quarter of 2023 was mainly attributable to the sustained solid growth in private consumption and services trade. However, on a seasonally adjusted quarter-to-quarter basis, real GDP fell by 1.3%.

Analysed by major GDP component, private consumption expenditure increased by 8.5% in real terms in the second quarter of 2023 over a year earlier, after the increase of 13% in the first quarter. Gross domestic fixed capital formation dropped by 1% in real terms in the second quarter of 2023 from a year earlier, as against the rise of 7.9% in the first quarter.

Over the same period, total exports of goods measured in national accounts terms recorded a decline of 15.3% in real terms from a year earlier, after the decrease of 18.9% in the first quarter. Imports of goods measured in national accounts terms fell by 16.1% in real terms in the second quarter of 2023, compared with the 14.6% decline in the first quarter.

Commenting on the phenomenon, a government spokesman said that due to the recovery of inbound tourism and private consumption, the Hong Kong economy continued to recover in the second quarter of 2023, though the momentum softened on the back of the strong rebound in the preceding quarter.

Analysed by major expenditure component, total exports of goods continued to plummet as the external demand for goods remained weak. Growth of exports of services accelerated as visitor arrivals rose further. Domestically, private consumption expenditure increased notably alongside the continued economic recovery, while overall investment expenditure saw a mild decline amid tightened financial conditions.

Looking ahead, the spokesperson said inbound tourism and private consumption will remain the major drivers of economic growth for the rest of the year. The improving economic situation and prospects will bode well for domestic demand, though tight financial conditions may impose constraints. In particular, improving labour market conditions, together with the government's various measures to boost the momentum of the recovery, will provide additional support to private consumption. Yet, exports of goods will continue to face intense pressure, as slower global economic growth weighs on external demand, the spokesperson added.

On the other hand, Hong Kong's finance chief Paul Chan wrote in his blog on Sunday, echoing the fact that the exports of goods still face immense pressure due to the weak external environment. He said that local investment will also cool down in the second quarter due to increase in interest rates and weak global economic prospects.

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