HK exits recession with 2.7pc growth

Hong Kong emerged from recession in the first quarter as the economy expanded by 2.7 percent from a year ago after the reopening of its borders revived spending.

That ends four consecutive quarters of contraction and topped the median estimate of a 0.5 percent uptick from Bloomberg economists.

Chief Executive John Lee Ka-chiu believed the city's economy in the second quarter will be even better than the first quarter as faster economic growth in the mainland and the acceleration of the local aviation capacity would provide further support.

"A series of large-scale promotional events have boosted tourism and consumption, improving the economy," Lee noted.

Visitor arrivals surged to some 2.5 million in March - up 68 percent from February - with the figure expected to swell this month as hundreds of thousands of mainland visitors poured in during the five-day Labor Day holiday.

This came as K11 Group said that both sales and footfall at its two shopping malls - K11 MUSEA and K11 Art Mall - rose by 50 percent year-on-year during the holiday.

Tourism will continue to improve, the government said in a report alongside the official release of the advanced economic growth data. But it added that exports remained subdued because of weak global demand.

Total exports dropped 18.7 percent during the January-March period while imports posted a decline of 14.5 percent, official data showed.

"Looking ahead, inbound tourism and domestic demand will remain the major drivers of economic growth this year," the report said.

"Visitor arrivals should recover further as transportation and handling capacity continue to catch up."

While the economy has now returned to growth, the city is still grappling with the side effects of its strict pandemic curbs from the past few years.

The population has continued to shrink, albeit at a slower pace, and Hong Kong faces headwinds of slowing world growth and tightening credit overseas.

Meanwhile, the International Monetary Fund yesterday downgraded its full-year forecast for Hong Kong's economic growth to 3.5 percent this year - 0.4 percentage points lower than its previous estimate last October.

"On the downside at the moment we're mostly worried about external risks," Thomas Helbling, the IMF's deputy director for the Asia and Pacific department, said at a briefing about the organization's economic outlook for the region. It raised Asia's economic forecast to 4.6 percent for 2023.

"On the real side, the global economy has been slowing," he said.

Another concern is the "further tightening of credit in the United States or in the Euro area, which could then hit Hong Kong through trade channels," Helbling said.

"But on the upside, we see some scope for stronger pent-up demand in Hong Kong as well as in China," he added.