HK recovery uneven despite high GDP: economist

A local economist, Ho Lok-sang, highlighted that Hong Kong's third-quarter GDP growth has boosted business confidence, yet recovered unevenly and requires time to extend across the economy. In the third quarter of 2026, Hong Kong's economy expanded 5.2 percent year-on-year, with the prime office space market showing robust recovery, particularly for Grade A centrally located locations.

However, Ho stressed that this growth is not yet permeating other segments, with office demand still subdued outside these prime areas and commercial property demand lagging.

Ho cautioned that a full recovery will be a gradual process, likely dependent on reduced rental costs. Despite these challenges, he remained optimistic about the remainder of the year, predicting a strong full-year growth of over 4 percent, potentially reaching 4.5 percent. The government's forecast for 2026's real GDP growth is projected between 3.5 to 4.5 percent.

The financial sector is performing exceptionally well with a high level of Initial Public Offerings (IPOs) and no signs of decline. Exports are also doing well, while construction demand and retail consumption, including restaurants, remain lagging. To invigorate these sectors, Ho suggested that major events and tourism could play a crucial role. Events like concerts and Halloween, along with continued tourism, could stimulate consumption further.

Ho pointed to significant progress in goods exports, driven by demand for AI and electronics, and services exports, which grew due to tourism and financial activities. However, private consumption growth slowed to 2.8 percent, trailing the previous quarter's pace, indicating that the benefits of retail and investment growth have not yet permeated into households.

Kenny Shui, vice president of Our Hong Kong Foundation, noted that the third-quarter figures indicated a strengthening momentum. Goods exports surged 30.4 percent, fueled by AI and electronics demand, while services exports increased by 4.3 percent due to tourism and financial activities. However, private consumption growth was slower than expected at 2.8 percent, suggesting that the recovery needs to be felt more broadly.

Shui forecasted a fourth-quarter growth of 4 to 5 percent and a full-year growth of around 5 percent, surpassing the government's projection. He cautioned that interest rates could impede business investment and household spending, and with unemployment at 3.9 percent, consumption still requires support from job and income growth. For the fourth quarter, the critical factors will be the continuation of strong exports and improvements in consumption and employment.