Hong Kong: Growth seen moderating – UOB

UOB’s Ho Woei Chen notes that Hong Kong’s Gross Domestic Product (GDP) growth slowed to 4.3% year-on-year in 2Q26, with a 0.6% quarterly contraction after a strong start to 2026. Goods exports remain robust, but consumption and investment growth have moderated. The economist highlights downside risks from tighter Mainland capital controls and geopolitical uncertainties, while maintaining GDP forecasts of 3.9% for 2026 and 2.4% for 2027.

Momentum slows after strong first quarter

"Hong Kong’s GDP growth slowed more than expected to 4.3% y/y in 2Q26 from 5.9% y/y in 1Q26 (Bloomberg est: 4.9%, UOB est: 4.4%). On a seasonally adjusted q/q basis, GDP contracted 0.6%, reversing from the strong 2.9% expansion in 1Q26 and marking the first quarterly decline since 4Q22. The softer outturn suggests that economic momentum moderated after a robust start to the year."

"Electronics products such as semiconductors, computer parts, processors and telecom & ICT equipment made up 57% of Hong Kong’s exports in the first 5 months of this year. The city remains the gateway for the Mainland’s high-tech goods trade despite its small industrial base (manufacturing accounts for less than 1% of GDP). The ongoing AI-related global investment cycle is expected to provide continued support for Hong Kong’s export performance through the remainder of 2026."

"Domestic consumption has remained relatively resilient. Retail sales by value recorded a 13th consecutive month of growth in May, supported primarily by stronger demand for consumer durables, including electronics, jewelry, and watches. Consumer spending has been underpinned by improving sentiment and a recovery in tourism, with visitor arrivals rising 13.0% y/y in 1H26."

"The residential property market continued to strengthen. Home prices increased for a 13th consecutive month in Jun, rising 0.3% m/m and 12.7% y/y. In 1H26, prices gained 7.9%, more than double the 3.6% increase recorded for the whole of 2025, reflecting an accelerating recovery in housing market."

"Hong Kong's economy expanded by an average of 5.1% y/y in 1H26. However, growth is expected to moderate further in 2H26 as base effects become less favourable. We therefore maintain our 2026 GDP growth forecast at 3.9%, which remains above the government's official forecast range of 2.5%-3.5%. We also keep our 2027 GDP growth forecast at 2.4%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)