2013-01-01 13:46:52 - Hong Kong Business Forecast Report Q1 2013 - a new country guide report on companiesandmarkets.com
We have seen fit to downgrade our forecasts for Hong Kong´s real GDP growth. We now expect 2012 growth having slowed from a previous estimate of 2.2% to 1.8%. This remains below the consensus projection of 2.5% and close to the midpoint of the government´s recently revised forecast range of 1.0% to 2.0%. Our 2013 forecasts have also been revised downward, to 2.5% from a previous 3.5%.
Hong Kong´s property market is undergoing a necessary correction.
We are not discounting marginal near-term upside in prices, as investors are riding on bullish sentiment from the equity markets, and given the third round of quantitative easing. That said, we believe that receding demand, stemming from further economic deterioration and the government´s tightening measures, coupled
with the anticipation of a meaningful increase in the housing supply in the coming years, will combine to enforce a correction in property prices in 2013.
We expect the housing correction to weigh on the government´s revenue stream. Moreover, the government appears on course to upgrade the social welfare infrastructure. We therefore could witness an increase in welfare disbursements as growth concerns come to the fore in 2013. While we expect some deterioration in the government´s fiscal position, we believe the decline is unlikely to be of material effect.
The export sector saw a marked deterioration in Q312, and we expect this downward trajectory to have extended into the fourth quarter as the performance in forward-looking electronics and machinery sectors continues to disappoint. While we could possibly see a stabilisation in economic momentum in 2013, we do not envision a strong recovery in the Hong Kong´s exports.
Key Risks To Outlook
Should the mainland economy experience a sharper-than-expected slowdown, or the sovereign crisis in Europe take a turn for the worse, the ripple effect on Hong Kong means that its economy would be disproportionately affected.
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