Hong Kong's real GDP expanded by 3.1% year-on-year in the first quarter, with the annual growth forecast remaining at 2%-3%.

Today, the Hong Kong Special Administrative Region Government released the "2025 First Quarter Economic Report" and revised figures for the Gross Domestic Product (GDP) for the first quarter of 2025. Hong Kong's real GDP in the first quarter saw a 3.1% year-on-year expansion, faster than the 2.5% growth in the previous quarter. After seasonal adjustments, the real GDP showed a significant growth of 1.9% compared to the previous quarter. Dr. Linda Yueh, Acting Chief Economist of the Hong Kong Government, explained the economic performance in the first quarter of 2025, as well as the latest forecasts for the full-year GDP growth and inflation for 2025. The forecast for the full-year real GDP growth in 2025 remains between 2% and 3%, as announced in the Budget. The forecast for the basic and overall consumer price inflation for 2025 remains at 1.5% and 1.8% respectively, consistent with the Budget announcement. The Hong Kong economy saw robust expansion in the first quarter of 2025, driven mainly by a significant increase in goods exports and service outputs, supported by a moderate recovery in overall investment spending, while private consumption spending continued to experience a slight decline. The global economy maintained steady growth in the first quarter, with sustained external demand and a significant increase in exports ahead of the expected rise in US tariffs in early April prompting some goods to be shipped early, leading to a noticeable acceleration in overall goods exports in Hong Kong, with a real year-on-year growth rate of 8.4%. Additionally, the increase in visitor arrivals, increased cross-border transportation, and significant growth in cross-border financial and fundraising activities contributed to a continued significant expansion in service outputs in the first quarter, with a real year-on-year growth rate of 6.6%. On the local front in Hong Kong, increased spending on machinery, equipment, and intellectual property products, along with a significant increase in property transaction volume compared to the same period last year, led to a moderate growth in overall investment spending, rising 2.8% year-on-year. However, private consumption spending continued to decline slightly by 1.1%, reflecting ongoing shifts in consumer patterns. The labor market in Hong Kong remained tight in the first quarter, with the seasonally adjusted unemployment rate staying at a low level of 3.2%, slightly higher than the 3.1% in the previous quarter; underemployment rate remained at a low level of 1.1%. Employment income continued to show steady growth. The local stock market in Hong Kong experienced a surge in the first quarter of 2025 due to breakthroughs in mainland China's artificial intelligence development and stimulation measures proposed by the central government during the National People's Congress and Chinese People's Political Consultative Conference, but concerns about the outlook of US trade policy dampened as the end of the quarter approached. Residential property prices remained soft. Consumer price inflation in Hong Kong remained moderate in the first quarter. The Composite Consumer Price Index rose by 1.2% year-on-year, consistent with the previous quarter; including the effect of government relief measures, the overall Consumer Price Index rose by 1.6% year-on-year, higher than the 1.4% in the previous quarter. With recent slight easing of international trade tensions, some of the unfavorable factors and uncertainties in the external environment have been mitigated, easing some downward pressure on the global economic outlook. Mainland China's economy continues to grow steadily under more proactive fiscal policy and moderately loose monetary policy, which is favorable for Asia and Hong Kong's goods exports. Continued international trade activity and improvements in visitor arrivals in Hong Kong's tourism industry are expected to benefit service exports in Hong Kong. However, uncertainties remain regarding US trade policy and its complex monetary policy, which could impact global financial conditions and investment sentiment. Additionally, continued shifts in consumer patterns among citizens and visitors continue to constrain local market consumption, although the continued increase in employment income and various measures introduced by the SAR government to boost events and the tourism industry may help to improve consumer sentiment. Gross Domestic Product According to the revised figures released by the government's Census and Statistics Department today, Hong Kong's real GDP grew by 3.1% year-on-year in the first quarter of 2025 (unchanged from preliminary estimates), up from 2.5% in the previous quarter. After seasonal adjustments, the real GDP rose by 1.9% in the first quarter (revised from an estimated increase of 2.0%), compared to a 0.9% increase in the previous quarter. External Trade Supported by sustained external demand and anticipatory shipping of goods ahead of a significant increase in US tariffs in early April, overall goods exports accelerated to 8.4% growth in the first quarter after a 1.3% increase year-on-year in the previous quarter. In terms of major markets, exports to mainland China saw strong year-on-year growth, exports to the US rebounded, exports to the EU further declined, exports to ASEAN markets surged, and exports to high-income Asian economies showed mixed performance. After seasonal adjustments, overall goods exports saw a significant real increase of 10.2% in the first quarter. Service outputs continued to expand significantly by 6.6% in the first quarter, following a 6.5% real growth in the previous quarter, with all major service components showing further increases. Specifically, tourism service outputs and transportation service outputs continued to expand with the increase in visitor arrivals and cross-border transportation volume, while financial service outputs surged due to significant growth in cross-border financial and fundraising activities. After seasonal adjustments, service outputs in the first quarter showed minimal change. Domestic Economy Private consumption in Hong Kong continued to be affected by ongoing shifts in consumer patterns, with a 1.1% year-on-year decrease in private consumption spending in the first quarter, compared to a 0.2% decline in the previous quarter. After seasonal adjustments, private consumption spending decreased by 1.6%. Government consumption spending increased by 1.2% year-on-year in the first quarter, following a 2.1% increase in the previous quarter; after seasonal adjustments, government consumption spending increased by 0.5%. Overall investment spending, calculated based on total fixed capital formation in Hong Kong, returned to moderate growth in the first quarter, increasing by 2.8% year-on-year after a slight decline of 0.7% in the previous quarter. This was driven by significant increases in spending on machinery, equipment, and intellectual property products, a notable increase in property transaction volume compared to the same period last year, and a sharp rise in ownership transfer fees; however, building and construction expenditure experienced a mild decline. Labor Market The labor market in Hong Kong remained tight in the first quarter of 2025, with a seasonally adjusted unemployment rate staying at a low level of 3.2%, slightly higher than the 3.1% in the previous quarter; the underemployment rate remained at a low level of 1.1%. Median nominal monthly employment income for full-time employees increased by 6.4% year-on-year in the first quarter. Assets Market After maintaining narrow fluctuations in January 2025, Hong Kong's stock market experienced a surge in the first quarter following breakthroughs in mainland China's artificial intelligence development and stimulus measures proposed by the central government during the National People's Congress and Chinese People's Political Consultative Conference. However, concerns about the outlook of US trade policy caused a cooling off as the end of the quarter approached. Residential property prices in Hong Kong remained soft.The index soared in mid-March due to the breakthrough development in artificial intelligence by the mainland and the central government's measures to stimulate the economy during the National People's Congress and the Chinese People's Political Consultative Conference. However, as the end of the quarter approached, the market cooled down due to concerns about the outlook of US trade policy. The Hang Seng Index (HSI) rose to a three-year high of 24,771 points on March 19, before slightly decreasing. At the end of the first quarter, it closed at 23,120 points, up 15.3% from the end of 2024. Trade tensions escalated in early April as the US significantly increased tariffs, leading to global financial market volatility. The HSI also declined, but has since regained momentum.Residential property prices in Hong Kong remained soft in the first quarter, as increased uncertainties in the external environment due to US trade and monetary policies led to a more cautious market sentiment towards the end of March. Overall residential prices dropped by 2% in the first quarter. With the decline in residential prices, the property affordability index for citizens slightly improved to around 59% during the quarter, but it still remains higher than the long-term average of 56% from 2005 to 2024. Trading volume for residential properties decreased by 19% to 12,193 contracts registered with the Land Registry in the first quarter, compared to the previous quarter, but was 24% higher than a year ago. On the other hand, overall residential rents remained strong, increasing by 0.4% in the first quarter. The non-residential property market in the first quarter remained generally weak, with varying levels of trading activity in different market segments and further declines in prices and rents. Price Consumer price inflation in the first quarter of 2025 remained mild, with the overall Composite Consumer Price Index increasing by 1.2% year-on-year, the same as the previous quarter. Food prices rose slightly, while private housing rents saw a faster increase, and price pressures for other major components remained largely under control. Including the effects of one-off relief measures introduced by the government, the overall Composite Consumer Price Index rose by 1.6% year-on-year, higher than the 1.4% in the previous quarter. The overall inflation rate in the first quarter exceeded the basic inflation rate, as the government provided less subsidy for electricity compared to the same period last year. Latest Forecast for Local Gross Domestic Product and Prices in 2025 With recent slight easing of international trade tensions, the unfavorable factors and uncertainties in the external environment have slightly eased, reducing the downward pressure on global economic prospects. Mainland China's economy continues to grow steadily under a more proactive fiscal policy and moderately loose monetary policy, benefiting the performance of goods exports in Asia and Hong Kong. Continued international trade and improvement in inbound tourism are expected to benefit Hong Kong's service exports. However, uncertainties in US trade policy remain, and its future monetary policy remains complex, which may impact global financial conditions and investment sentiment. Additionally, changes in consumer spending patterns by residents and tourists may continue to constrain local market consumption, although increasing employment income and various measures by the SAR government to promote major events and the tourism industry are expected to boost consumer sentiment. Taking into account actual figures for the first quarter and the latest developments globally and locally, the forecast for real GDP growth for the full year 2025 remains at 2% to 3% as announced in the Budget. The government will continue to closely monitor the situation. For reference, current growth forecasts by private analysts range from 1.0% to 2.5%. In terms of inflation outlook, pressures on local costs and prices from the external environment should remain manageable, and overall inflation is expected to remain mild in the short term. Considering the similarity of the first quarter inflation situation to earlier forecasts, the forecasts for basic and overall consumer price inflation rates in 2025 are maintained at 1.5% and 1.8% respectively, in line with the Budget announcement.