Hong Kong's economy grew 7.6% in fourth quarter on strong exports, consumption

Hong Kong's economy grew 7.6 percent in the fourth quarter, and the territory's financial chief declared its economy in the best shape since the Asian financial crisis of 1997-98. The growth was driven by healthy consumer spending, capital investment and exports. It was stronger than economists' projections of 7.2 percent growth in the October-December quarter, but down from the 8.3 percent growth notched in the third quarter.

“Hong Kong has now fully emerged from the Asian financial crisis and has regained its strength and vitality,” Financial Secretary Henry Tang said in his annual budget speech to lawmakers. “I am cautiously optimistic about this year's economic outlook.”

For the full year, Hong Kong grew 7.3 percent, down from the 8.6 percent growth achieved in 2004. For 2006, Tang said he expects Hong Kong's GDP to increase by 4 percent to 5 percent on year, which is slightly higher than the trend growth rate over the past decade. In the longer term, Tang forecast a trend growth rate of 4 percent from 2007 to 2010.

Last year's nominal gross domestic product – the sum of all goods and services produced – surpassed its peak in 1997, the year when Hong Kong returned from British to Chinese rule, to reach a new record of HK$1,382.2 billion ($177 billion), Tang said. The economic expansion was driven by robust growth in exports, with merchandise exports rising 11.4 percent on-year in the fourth quarter, compared to a 12.8 percent increase in the third quarter.

Exports of services, such as tourism, transportation and offshore trade, also expanded 7.7 percent in the fourth quarter after rising 8.2 percent in the third quarter. Consumer spending was also stronger than expected, as unemployment fell and wages rose amid strong economic growth in the past two years. Private consumption expenditure was 3.7 percent higher in the fourth quarter, following a rise of 4.1 percent in the third quarter.

Encouraged by the economic expansion, companies also poured more money back into their businesses, with investment in machinery and equipment surging 24.2 percent in the fourth quarter after rising 7.1 percent in the third. Overall investment spending – measured by gross domestic fixed capital formation – expanded by 7.5 percent, up from just 2.8 percent in the third quarter.

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