With abating growth worries in mainland China, reduced risks over the Syrian crisis, and deferred Fed tapering, a better end to the year appears to be in store for Asia.
Global market volatility, however, could return as uncertainties still abound. Political gridlock and brinksmanship in the US could trigger a technical default on US sovereign debt and have economic impacts far worse than that arising from a brief government shutdown or fiscal sequestration. With regard to liquidity conditions, Fed tapering is still on the table later this year. In addition, the structural challenges faced by many emerging Asian countries justify a cautious, though not negative outlook in the region.
Indeed, recent data offer little comfort. The recovery in the advanced economies has thus far provided little benefits to Asian exporters. Hong Kong retailers are also likely to face challenges ahead as Mainland travellers may be less enticed to visit Hong Kong under the country's new tourism law.
All in all, the Hong Kong economy will improve from its lackluster 2012 performance, but no strong rebound is expected. Our forecast is for a mild deceleration in GDP growth in the second half to slightly below 3%. With the local economy having expanded by 3.1% in the first half, however, a full-year growth of 3% is still within reach.
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Hong Kong Economic Monitor (October 2013). Hang Seng Bank Limited. All rights reserved. For more information, please contact the Economic Research Department, G.P.O. Box 2985, Hong Kong.