economy watch 2018 from 1.5% in 2017,” she said. “We see upside risks from food price inflation as the agricultural products in mainland China face supply-side constraints. In addition, further tightening of labour market conditions will likely pose upward pressure on wage growth.”
Hong Kong’s relatively positive GDP figure in 2017 can be attributed to rising asset prices.
In 2018, Shenzen’s economic boom is Hong Kong’s bane Hong Kong’s economy grew an average of 3.7% in 2017 whilst Shenzhen’s economy grew an average 13.2% over the same period.
ooking at the overall picture, BMI Research suggest that slower economic growth for Hong Kong will weigh on consumer spending, with real GDP growth expected to slow to around 3% yearon-year in 2018, a 0.7% reduction from the growth figures sustained last year. Real economic activity also moderated to 3.6% year-on-year on Q317 from the high of 3.8% year-on-year seen in Q217. “We expect this downtrend to continue due to a softening housing market, a moderation in mainland China’s economic activity, and unfavourable base effects,” according to BMI Research. Hong Kong’s relatively positive GDP figure in 2017 can be attributed to rising asset prices, particularly house and equity prices and investment from mainland China, but BMI Research suggests that for the next 12 months, private final consumption is expected to moderate, growing by 3.5%, reflecting the slowdown in GDP growth. However, low unemployment and rising wages—long-term characteristics of the Hong Kong economy—will
HONG KONG BUSINESS | MAY 2018
Real GDP expected to grow by around 3% year-onyear in 2018, a 0.7% reduction from the growth figures sustained last year.
remain positive driving forces for consumption for the rest of 2018. Subdued inflation In terms of inflation, Sylvia Sheng, China and Asia economist of Merrill Lynch in Hong Kong, said that headline consumer price inflation for Hong Kong remained unchanged at 1.7% year-on-year in January, although this figure would have definitely risen over the last month given the celebrations of the Lunar New Year—prices for food and travelrelated services during the holidays tend to increase. “Overall, we expect inflation to increase to 2.2% year-on-year in Convergence
Source: BMI, Wind
Shenzen’s boom Although BMI Research suggests that Hong Kong will likely be surpassed by Shenzhen in terms of economic size this year—Hong Kong’s economy grew an average 3.7% when it was handed over to the mainland in 1997 up until 2017, Shenzhen’s economy grew an average 13.2% over the same period—the territory will remain a leader in the financial sector. Alicia Garcia-Herrero, chief economist for Asia-Pacific at Natixis. said that the logistics sector in Hong Kong grew vibrantly in 2017 underpinned by the global trade upturn, with cargo handled by air, road, and port all seeing expansion from a year earlier when the sector had an extremely difficult time. “Going forward, we expected the good performance of global trade to be carried in 2018, albeit at slower rates.” But BMI Research suggests that even though Hong Kong is likely to be one of the main ports that will serve the Pearl River Delta region over the coming year, its trade fortunes are likely to be weaker than previous showings due to its increasing uncompetitiveness. “Business situation surveys show that business owners in major sectors like retail, financing and insurance, and professional and business services perceived improved business situations in recent quarters,” noted Garcia-Herrero.