Bumpy Ride For Hong Kong's Economy This Year - Hang Seng Bank

Tom Burroughes

12 February 2013

Hong Kong’s economic recovery this year – tied as it is to the fortunes of the US because of the exchange rate peg – is likely to be “bumpy”, with a slow start in the first six months before the pace of growth accelerates, predicts Hang Seng Bank.

The bank predicts that the jurisdiction will post a 3.0 per cent growth in real gross domestic product in 2013, with the 2012 GDP growth figure expected to come in, when full data is available, at 1.5 per cent, the bank said in a note. In 2011, GDP growth was 4.9 per cent.

“Incoming data seems to have provided further evidence supporting our view that the local economy has stabilised and is on track for a more solid recovery,” the bank said. “November activity indicators were generally stronger than expected, with robust reading on unemployment rate, retail sales, PMI and the Business Tendency Survey,” the bank said.

However, given Hong Kong’s exposure to developments in the US, the bank devoted a large chunk of its analysis to the ongoing debates in Congress about the “fiscal cliff” issue and the large US fiscal deficit.

“Besides the incremental drag that would result from potential spending cuts, the US will also have to raise its debt ceiling. Time is short, as the Republicans and Democrats have less than two months to strike another deal, otherwise the Us would have to default on its debt for the first time in history,” the bank said.