Economy records fastest growth since Q4 2023 in the first quarter

GDP reading: GDP growth sped up to 3.1% year on year in the first quarter from 2.5% in the fourth quarter of last year and marked the strongest expansion since Q4 2023. Rebounding fixed investment, higher tourism, and a surge in goods exports as firms front-loaded shipments ahead of looming U.S. tariffs underpinned the reading, while private consumption remained downbeat as Hong Kongers preferred to spend money on the mainland. On a seasonally-adjusted quarter-on-quarter basis, economic growth improved to 2.0% in Q1, compared to the previous quarter's 0.9% expansion.

Drivers: Private consumption fell 1.2% in the first quarter, marking the fourth straight period of contraction. Government spending grew 1.2% (Q4 2024: +2.1% yoy). Meanwhile, fixed investment bounced back, growing 2.8% in Q1, contrasting the 0.7% decrease recorded in the previous quarter. Exports of services growth accelerated to 6.6% in Q1 (Q4 2024: +6.5% yoy). Conversely, imports of services growth moderated to 6.2% in Q1 (Q4 2024: +8.3% yoy). Exports and imports of goods growth rose sharply to 8.7% and 7.4% respectively, from 1.3% and 0.4% in the prior quarter.

Panelist insight: United Overseas Bank’s Ho Woei Chen commented on subdued private spending: “The change in local consumption pattern where residents choose to spend across the border is becoming more entrenched. Coupled with weaker purchasing power from mainland visitors, this will weigh on Hong Kong’s economic recovery prospects.” On exports, Nomura analysts said: “The robust performance in net exports was largely due to the front-loading of global trade ahead of Trump’s “reciprocal” tariffs announced on 2 April and the vastly intensified tit-for-tat US-China trade war. However, as most of these tariffs became effective from 9 April, exports are likely to face significant challenges in the coming months.”

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