Hong Kong: Economy records fastest annual growth since Q4 2021 in the fourth quarter
GDP growth accelerated to 4.3% year on year in the fourth quarter, from 4.1% in the third quarter, with the expansion underpinned by private spending and tourism. Q4’s reading marked a two-year high, but undershot market expectations. On a seasonally-adjusted quarter-on-quarter basis, economic growth accelerated to 0.5% in Q4, compared to the previous period’s 0.3% growth. Q4’s reading marked the best result since Q1. Over 2023 as a whole, GDP growth was 3.2%, much weaker than projected by the government early in the year.
Household spending growth waned to 3.5% year-on-year in Q4 compared to a 6.2% expansion in Q3. Government spending contracted at a more pronounced pace of 5.2% in Q4 (Q3: -4.0% yoy), amid fiscal consolidation efforts. Meanwhile, fixed investment growth moderated to 15.7% in Q4, compared to 21.8% in the prior quarter.
Exports of services growth fell to 22.1% in Q4 (Q3: +23.2% yoy). In addition, imports of services growth moderated to 27.4% in Q4 (Q3: +28.9% yoy). In contrast, exports and imports of goods returned to expansion following contractions in Q1–Q3, likely reflecting improved global electronics demand.
Looking ahead, our Consensus is for GDP growth to improve in sequential terms in Q1 2024, even though year-on-year growth will ebb due to a higher base of comparison.
On the outlook, United Overseas Bank’s Ho Woei Chen said:
“Overall, we see the stabilisation of China’s economy and the start of rate cuts by major central banks in 2H24 which eases the financial conditions, as the key positive drivers of Hong Kong’s economic outlook this year while geopolitical tensions (US-China relation, Middle-East etc.), prolonged weakness in the domestic property market, and weaker global demand including from China are the key downside risks.”
DBS analysts said:
“The recovery ahead will remain modest based on our in-house projection for the Fed to cut rates by 100bps in 2H24. 1M and 3M-HIBORs are likely to stay above 4% this year. Furthermore, a softening Mainland growth momentum is expected to drag Hong Kong’s economic performance.”