[ET Net News Agency, 22 June 2018] Hang Seng Bank (HSB) (00011) revised its Hong Kong
gross domestic product (GDP) growth forecast for 2018 to 3.7%, up from its previous
estimate of 3.3%.
HSB noted Hong Kong's economy grew at the fastest pace since 2011 in the first quarter
of this year, with GDP rising by 4.7% year-on-year after increasing by 3.4% in the fourth
quarter of 2017 and 3.8% last year as a whole. In nominal terms, growth was 9.1% in the
first quarter - also the strongest in seven years. It said the main driver of
first-quarter growth was consumer spending, which jumped by an annual rate of 8.6%
following a 6.3% rise in the preceding quarter.
HSB is also mindful of economic uncertainties lying ahead, including potential changes
in international trade policy, growing geopolitical risks, and renewed instability in
peripheral Eurozone nations and/or emerging market economies. It has so far seen few signs
that any of these risks is materialising, but they have the potential to slow down Hong
Kong's growth through the channels of trade, financial markets and tourism.
With the US Federal Reserve tightening monetary policy, widening interest rate gaps
between the US and Hong Kong may prompt money outflows from the city and put downward
pressure on the Hong Kong dollar (HKD) as well as the aggregate balance in the Hong Kong
banking system (a measure of excess liquidity). If the aggregate balance falls to a very
low level, HSB believes banks in Hong Kong may raise their prime lending rates in response
to the rising cost of funding. (HL)