Hong Kong posts strongest quarterly economic growth in almost 5 years at 5.9%

Hong Kong has recorded its fastest quarterly economic growth in nearly five years, hitting 5.9 per cent, driven by private consumption and government spending despite the war in the Middle East. The first-quarter growth outpaced the 4 per cent rise in the fourth quarter of last year, according to an advance estimate released by the Census and Statistics Department on Tuesday. The 5.9 per cent year-on-year increase marks the strongest performance since the 7.6 per cent growth recorded in the second quarter of 2021. A government spokesman said the economic outlook remained positive, supported by strong global demand for artificial intelligence-related electronics, sustained growth in visitor arrivals and robust cross-boundary financial activity. “Relatively solid business and consumer sentiment is expected to continue supporting domestic demand,” he said. “However, persistent tensions in the Middle East pose downside risks to the economic outlook.” Government consumption expenditure was 2.9 per cent higher in the first quarter over a year earlier, accelerating from the 1.5 per cent increase in the fourth quarter of 2025. Private consumption expenditure rose by 5 per cent in real terms over the same period, faster than the 2.5 per cent rise in the final quarter of last year. Exports of goods rose by 23.8 per cent, despite a global oil crisis triggered by the war in the Middle East, which has entered its third month. Ahead of the announcement, Financial Secretary Paul Chan Mo-po on Sunday hailed the city’s strong economic performance, saying the increase for the first three months would mark the fastest quarterly growth in nearly five years. He also attributed some of the growth to a 17 per cent year-on-year rise in visitor numbers in the first quarter, reaching 14.31 million. The city’s gross domestic product (GDP) grew by 3.5 per cent year on year in 2025, marking a third consecutive year of expansion. Leah Fahy, a senior China economist at Capital Economics, said Hong Kong’s first-quarter growth “surprised significantly to the upside”. On a seasonally adjusted basis, GDP increased by 2.9 per cent in the first quarter compared with 1.1 per cent in the fourth quarter of last year. Fahy said the 2.9 per cent rise was the “fastest pace of quarterly expansion in over 15 years,” beating Capital Economics’ forecast at 1.2 per cent. She said the main drivers of growth in the first quarter were investment expenditure and, in particular, private consumption. Much of the rebound in domestic demand, despite some unwinding of the stock market’s rally in the last quarter, likely reflected the impact of falling interest rates as the benchmark Hong Kong interbank offered rate slid in the first quarter, she said. “That’s helped to drive up business investment. It’s also supported a continued recovery in property prices in the city, boosting both household wealth and consumer confidence, as well as broader investor sentiment,” Fahy said. “What’s more, because most mortgages in Hong Kong are variable, payments will have fallen, increasing household disposable incomes.” She said the outlook for Hong Kong’s economy was “looking increasingly rosy”. “The Hang Seng [Index] has regained ground since the start of this quarter and we expect it to extend its rally further, while the property sector seems to have finally turned a corner,” she said. Tommy Wu, Standard Chartered Bank’s senior economist for Greater China and North Asia, said the extent of Hong Kong’s exposure to the Middle East conflict would depend on how long the war lasted and any further economic repercussions. “While the spending pattern of tourists has changed compared [with] pre-pandemic [levels], we continue to see retail sales rebounding along with rising tourist numbers,” he said. “This means that even though the ‘per head’ spending might have remained lower than in the past, overall tourist spending has gone up and this contributed to first-quarter GDP growth.” Just days before the United States and Israel launched strikes on Iran on February 28, Chan predicted GDP growth for 2026 would be between 2.5 and 3.5 per cent year on year. Junyu Tan, regional economist for North Asia at trade credit insurance company Coface, expected Hong Kong’s economy to grow by 2.8 per cent in 2026, within the government’s forecast range. “Despite tourists shifting spending from goods to services, domestic consumption appears to be gaining momentum, supported by positive wealth effects from recovering residential property prices,” Tan said. “The recent boom in goods exports has been driven largely by electronics, reflecting the global surge in AI-related investments. Overseas buyers may also be accelerating inventory building amid concerns over potential supply chain disruptions later this year should the Middle East conflict persist.” Tan said the “solid” first-quarter growth suggested that “risks to Hong Kong’s outlook remain broadly balanced despite geopolitical tensions”. “The relatively small weight of energy in the consumer price index basket, together with diversified supply sources, helps shield household purchasing power from sharp increases in energy prices,” he said. “That said, a prolonged conflict could still weigh on commodity flows and financial trading activity.” The conflict has triggered a global fuel crisis, with Hong Kong’s fuel prices soaring to the highest in the world in the first quarter. This has led to higher costs across industries, from logistics and laundry services to commercial transport.

Hong Kong posts strongest quarterly economic growth in almost 5 years at 5.9%

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Robust exports and resilient domestic consumer spending drive growth despite Middle East tensions and rising energy costs

Robust exports and resilient domestic consumer spending drive growth despite Middle East tensions and rising energy costs