Hong Kong lifts 2026 GDP forecast after 5.1% first-half growth

Hong Kong will raise its full-year GDP forecast after the economy grew 5.1 percent in the first half, stronger than expected, Financial Secretary Paul Chan said, as AI export demand and services output underpin momentum.

"Considering the overall economic development, the revised full-year growth forecast to be published mid-month will be adjusted upward from the original range," Chan wrote in his weekly blog post. He flagged geopolitical tensions, US interest rates and other uncertainties as risks to the outlook.

The upward revision follows official data showing second-quarter GDP rose 4.3 percent from a year earlier, the 14th consecutive quarter of expansion, though slightly below the 4.4 percent consensus forecast from 15 economists polled by Reuters. Growth slowed from 5.9 percent in the first quarter. Total goods exports jumped 28.8 percent year on year in the second quarter, accelerating from 23.8 percent growth in the prior three months, while private consumption expenditure rose 2.9 percent, down from 4.9 percent.

The revised forecast will be published alongside detailed second-quarter GDP data on Aug. 14. The stronger-than-expected trajectory supports the government's push to position Hong Kong as a regional hub for AI-related trade and financial services, though the seasonally adjusted quarter-on-quarter contraction of 0.6 percent in the second quarter shows momentum is cooling from the first quarter's pace.

Export engine stays hot

Goods exports have been the primary growth driver, with total exports of goods rising 28.8 percent in the second quarter, accelerating from 23.8 percent in the first quarter. Imports of goods climbed 29.3 percent, compared with 29.9 percent growth in the prior quarter. The government attributed the strength to global demand for AI-related products, a trend that has also supercharged Taiwan's economy, which grew nearly 13 percent in the second quarter on the back of AI and US ties.

Services exports rose 3.4 percent in the second quarter, supported by sustained growth in visitor arrivals and steady demand for financial and business services. Government consumption expenditure increased 0.5 percent, down from 2.8 percent in the first quarter, while gross domestic fixed capital formation rose 4.6 percent after an 18.3 percent surge in the prior quarter.

The export boom has been a regional phenomenon. Taiwan's GDP grew nearly 13 percent in the second quarter, powered by AI chip demand and deepening US ties, while mainland China has also seen trade volumes expand. Hong Kong's re-export role as a gateway for goods moving between mainland China and global markets increases its exposure to the AI supply chain.

Domestic demand cools but stays resilient

Private consumption expenditure growth slowed to 2.9 percent in the second quarter from 4.9 percent in the first quarter, reflecting a moderation in household spending after a strong start to the year. The government said domestic demand should remain firm, supported by stable labor market conditions and solid business and consumer sentiment.

The last time Hong Kong's economy posted a seasonally adjusted quarterly contraction was in the third quarter of 2022, when the city was emerging from strict COVID-19 restrictions. The current 0.6 percent quarter-on-quarter decline in the second quarter, while modest, highlights the uneven nature of the recovery as external demand outpaces domestic spending.

The upward revision to the full-year forecast comes as Hong Kong's economy benefits from restored preferential trade privileges with the US, which drew thanks from Beijing earlier this year. However, the government warned that tensions in the Middle East and trade protectionist measures among major advanced economies warrant close surveillance.

For investors, the upward revision points to continued support for Hong Kong-listed equities, particularly technology and AI-related sectors, from the improving macro backdrop. The stronger growth trajectory may also strengthen the Hong Kong dollar and support property and financial services stocks, though the cooling quarter-on-quarter momentum and external risks suggest the pace of expansion will moderate in the second half.

This article is for informational purposes only and does not constitute investment advice.