International | May 24 2006
By Chris Shaw (Tokyo)
Hong Kong has surprised with its growth performance in the first quarter of the year, reporting a better than expected result of 8.2% thanks to a combination of strong exports and strengthening domestic demand.
The result compares with consensus estimates of a 7.2% increase and the 7.4% forecast of ABN Amro, which has subsequently lifted its forecast for full year growth to 6% from 5.5% previously.
The broker notes the contribution of domestic demand was very impressive, estimating it was responsible for about 6% of the growth total, compared to a contribution of just over 2% a year ago.
In the broker’s view a fall in unemployment to just over 5% from almost 6% this time last year is adding strength to the labour market, which has helped lift demand. DBS agrees consumption is likely to remain strong, pointing out higher wages are also contributing. The bank also notes higher tourist numbers are contributing to the strong performance.
DBS is forecasting growth for 2006 of 5.5%, with both it and ABN Amro’s estimates well above official government growth forecasts for the year of 4-5%, its conservative view influenced by what it suggests is ongoing volatility in global markets.
