City's GDP shrinks 0.5% in Q2 as growth slows to 5.1% YoY

The Hong Kong economy contracted slightly in the second quarter as robust growth in domestic demand and private investment was offset by a decline in exports after Japan's earthquake in March put a temporary halt to the regional supply chain, the government said on Friday.

The local gross domestic product (GDP) declined slightly by 0.5 percent in real terms in the second quarter on a quarterly basis. On a yearly basis, it also slowed down to a growth rate 5.1 percent compared with 7.5 percent in the first quarter.

The government attributed the GDP slow down due to a drag on the merchandise trade and a very high comparative base in the first quarter.

On the inflation front, local prices surged 5 percent in the second quarter from 3.7 percent in the first quarter as higher food prices and private housing rents continued to feed into the general price rise spiral.

Though local economic growth is slowing down amid increasing inflationary pressure, the government reckoned that its full-year GDP and inflation target unveiled in May should be met.

"The US economy can recover though the recovery pace is small, and coupled with more robust economic growth in Asia and strong domestic consumption prospects, we believe the GDP growth for full-year 2011 will remain at 5 to 6 percent," Acting Government Economist Andrew Au said at Friday's press conference.

"Global food prices may slow down in the coming months, so we forecast inflation may reach its peak in the coming months and then recede. We maintain our forecast for the local inflation rate to reach 5.4 percent," Au added.

"It is too early to assert that the US will launch a third round of monetary quantitative easing(QE3), so it is also premature to say that local inflation will be further fueled by the liquidity unleashed by QE3," Au said.

oswald@chinadailyhk.com

China Daily

(HK Edition 08/13/2011 page2)