Hong Kong Q3 GDP up 6.2 pct yr-on-yr; 2007 growth seen at 6.0 pct

Hong Kong Q3 GDP up 6.2 pct yr-on-yr; 2007 growth seen at 6.0 pct - UPDATE

	Published : Fri, 16 Nov 2007 10:31 By : Agencies Print this Story

HONG KONG (XFN-ASIA) - Hong Kong's gross domestic product (GDP) grew 6.2 pct year-on-year in the third quarter following 6.1 pct expansion in the first half of the year, the government said.

Economic growth for the full year is seen at 6.0 pct, acting government economist Helen Chan said in a statement.

The full-year forecast is at the upper end of the government's revised estimate made in August of 5-6 pct GDP growth this year.

Chan cited merchandise exports, which grew 6.4 pct year-on-year, and private consumption, which rose 9.7 pct, as key drivers for GDP growth in the third quarter.

She noted that while the government expects inflation to rise in the fourth quarter due to higher food prices - among other things, the composite consumer price index (CPI) for the full year is seen up 2.0 pct.

The fact that rise in imported inflation, which stems from factors such as the recent upsurge in crude oil prices and a further appreciation of the yuan, is readily passed on to consumers reflects the strength of local consumption, the economist said.

The adverse impact of the rise in imported inflation would be offset by a sustained rapid increase in labor productivity and a continued rise in productive capacity, she said.

She noted that merchandise exports to mainland China and many other emerging markets remained firm in the third quarter while those to the European Union member countries expanded further.

However, growth of exports to the US and Japan was lackluster.

Exports of services surged 12.3 pct year-on-year during the three months.

Chan noted that private consumption spending grew robustly during the third quarter, supported by an improving job market and rising household incomes and wealth.

With the economy sustaining strong growth momentum, the seasonally adjusted unemployment rate edged down further to 4.1 pct in the third quarter, the lowest since mid-1998, she said.

As labor market conditions tightened, wages and earnings improved in June compared to levels a year earlier.

Chan noted that while global credit market turbulence in August and September caused greater volatility around the world, it had only limited impact on the local financial markets.

'While the Hong Kong economy was relatively unscathed so far, the external trading environment has turned more uncertain, and the repercussions of the credit market turbulence have yet to play out more fully,' she said.

She predicted that the US economy, being overshadowed by the housing market slump, sub-prime mortgage problem and also tightening credit, is likely to slow more in the coming months.

'The economic outlook for EU and Japan is likewise clouded by the uncertainties stemming from the US economy and the evolving global financial market situation, although their economies have continued to expand at a rather solid pace up till now,' the government economist said.

The recent surge in oil prices has also added uncertainty to the global trading environment.

'These factors may have some impact on Hong Kong's trade performance in the fourth quarter,' she said.

However, robust trade growth in the mainland, the weakening of the Hong Kong dollar against many Asian currencies, strong inbound tourism as well as vibrant financial markets should add support to Hong Kong's exports of goods and services in the near term, thereby offsetting in part the negative impact of weak US demand, she said.

Domestic demand is likely to remain a key driving force in Hong Kong's overall economic growth in the fourth quarter, she said.

Consumer spending will continue to hold up well amid upbeat sentiment, rising incomes and strong household financial positions.

With the economy posting growth of 6.1 pct in the first three quarters and given the prevailing strength in domestic demand, Hong Kong should be able to attain 6 pct growth in real terms this year, the government said.

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Hong Kong Q3 GDP up 6.2 pct yr-on-yr; 2007 growth seen at 6.0 pct - UPDATE