HONG KONG (Reuters) -Hong Kong's economy expanded 4.1% in the third quarter from a year earlier, beating growth of 1.5% in the second quarter and 2.9% in the first, the government said on Friday, adding that inbound tourism and private consumption would underpin growth for the rest of the year.
However, the government revised down the full-year economic growth forecast to 3.2% from an earlier estimate of a 4.0% to 5.0% range. The economy shrank 3.5% in 2022.
Adolph Leung, a government economist, said in a statement that private consumption, improvement in household income and the government's support initiatives should bolster growth, while more visitors could be received as handling capacity recovers further.
"The difficult external environment amid increasing geopolitical tensions and tight financial conditions would continue to weigh on exports of goods and investment and consumption sentiment," Leung said.
Visitor arrivals for September were 2.77 million, bringing the total for the first nine month of 2023 to 23.32 million, according to Hong Kong Tourism Board preliminary data. That compared with last year's 66,037 and 249,699, respectively, when China was still in the grip of COVID-19 restrictions.
"Although Hong Kong will see support from consumption, the net tourism outflows ... and poor export performance will likely weigh on growth," said Gary Ng, Asia Pacific senior economist at Natixis.
Meanwhile, Financial Secretary Paul Chan told global financial leaders at an investment summit earlier this week that innovation and technology were also core engines to drive growth.
On a seasonally adjusted quarterly basis, the economy grew 0.1% in the July-September period. That compared with a 1.3% slide in the April-June quarter and 5.4% growth in the first.
A challenging external environment may bring downside risks for Hong Kong, with exports continuing to be under pressure amid weak demand from mainland China and globally, said Samuel Tse, an economist at DBS Bank, in a research note.
"After all, a solid recovery of asset markets and economy hinges crucially on a clear timeline of interest rates cuts," Tse said.
Hong Kong lowered its full-year underlying consumer price inflation forecast to 1.8% from 2.0%, and lowered its forecast for the headline rate to 2.2% from 2.4%.