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Hong Kong cuts 2014 forecast as Q2 growth slows

Hong Kong has cut its economic growth forecast for 2014 after an unexpected slowdown in second quarter expansion blamed on a fall-off in tourist spending and a slowdown in domestic demand. 

HONG KONG: Hong Kong on Friday (Aug 15) cut its economic growth forecast for 2014 after an unexpected slowdown in second quarter expansion blamed on a fall-off in tourist spending and a slowdown in domestic demand. Gross domestic product grew 1.8 per cent in the three months ending June 30 compared to the same period last year, the lowest since 2012, a government statement said.

The result falls short of a forecast by five economists polled by the Wall Street Journal, which expected a 2.0 per cent year-on-year increase. The figure was also lower than the previous quarter's year-on-year 2.6 per cent growth, as the government lowered its growth forecast for the year to two to three per cent from three to four per cent.

"The distinct slackening in tourist spending of late and the slowdown in domestic demand have emerged as new sources of uncertainty affecting the overall economic outlook," the statement said.

Exports of goods were up 2.3 per cent year-on-year for the second quarter, helped by a pick-up in June. The figure is up from the previous quarter's year-on-year growth of 0.5 per cent. Exports to the European Union and the US continued to grow at a moderate pace, while exports to other Asian markets improved due to a better global economic environment.

Exports of services saw a 2.3 per cent year-on-year decline for the second quarter, the first decrease since 2009, dragged by a slowdown in exports of travel services. Private consumption grew by 1.2 per cent year-on-year for the reported period, lower than the preceding quarter's year-on-year expansion of 2.0 per cent.

"Domestic demand is likely to maintain only a rather slow pace of expansion in the second half of the year. Local consumer sentiment may turn somewhat cautious following the economic growth slowdown in recent quarters," the statement said.

The potential for growth may be held back by the "rather fragile" advanced economies of the US and the EU, the statement added. Risks including the changing of the pace of US monetary normalisation and constrained recovery of the eurozone economy were a concern, the statement said.

"Looking forward, the global economy is expected to remain on a moderate recovery path in the rest of 2014. This, together with an improving mainland economy, should entail a somewhat brighter export outlook for Hong Kong in the period ahead."

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