Hong Kong has raised its full-year economic growth forecast for 2026 to a range of 3.5 to 4.5 per cent following a 4.3 per cent expansion in the second quarter, supported by buoyant external trade and resilient domestic demand.
Releasing its half-yearly economic report on Friday, the government revised its 2026 growth forecast from the previous range of 2.5 to 3.5 per cent, citing a stronger-than-expected performance in the first half of the year and taking into account the near-term outlook.
It said the economy should experience “solid growth” in the second half, with global demand for artificial intelligence-related electronic products expected to support merchandise trade, while rising visitor arrivals would benefit the exports of services.
The Tourism Board said Hong Kong received 26.71 million visitors in the first half of 2026, a 13 per cent increase from a year earlier.
Arrivals in June rose by 7 per cent year on year to 3.72 million, with mainland Chinese visitors accounting for 2.88 million.
The second-quarter figure, unchanged from the advance estimate released last month, was slower than the 5.9 per cent growth recorded in the first three months.
The economy expanded by 5.1 per cent in the first half, its strongest half-yearly performance in nearly five years.
Exports of goods surged by 28.9 per cent year on year in real terms, while private consumption expenditure rose by 2.8 per cent and overall investment increased by 4.4 per cent.
The government maintained its forecasts for underlying and headline inflation at 2.5 per cent and 2.6 per cent, respectively.
Government Economist Irina Fan Yuen-yee said growth was expected to ease in the second half compared with the first six months of the year, but the revised forecast remained above Hong Kong’s average growth rate of about 2.8 per cent in the decade before the Covid-19 pandemic.
“Even if growth slows slightly in the second half, the midpoint of the 3.5 to 4.5 per cent forecast is 4 per cent, which is still higher than the average level over the past 10 years,” she said.
The government says Hong Kong should experience “solid growth” in the second half. Photo: Jelly Tse
Fan said Hong Kong had benefited significantly from the global artificial intelligence (AI) investment boom because of its role as a major trading hub for technology products.
AI-related products accounted for about 70 per cent of the city’s merchandise exports, with their value rising by 63.7 per cent year on year in the second quarter after increasing by 41.5 per cent in the first three months, she said.
About a third of the mainland’s exports of integrated circuits were also transshipped through Hong Kong, she added.
Fan said the AI boom had also supported investment and fundraising activity, with technology and AI-related companies raising HK$97.9 billion (US$12.5 billion) through initial public offerings in Hong Kong between December last year and May.
The amount accounted for 55 per cent of all IPO funds raised in the city over the period, while nearly 500 companies were still applying to list in Hong Kong, she said.
Addressing why some sectors and residents might not feel the effects of the strong headline growth, Fan said the pace and duration of expansion varied across different parts of the economy.
Private investment grew by 19.4 per cent in the second quarter, marking a third consecutive quarter of double-digit expansion, while growth in private consumption was more moderate at 2.8 per cent.
Spending by Hong Kong residents abroad fell by 0.4 per cent during the quarter, which Fan said could indicate that some expenditure was shifting back to the local market.
She also pointed to changing consumer habits, saying online retail sales rose by 28 per cent in the first half of the year, compared with growth of about 10 per cent in overall retail sales.
Online-only retailers without physical shops accounted for 53 per cent of internet sales, up from 42 per cent in 2023, underscoring the growing importance of non-physical sales channels, she said.
An expert has said that while AI-related exports have helped the economy, it did not mean all sectors would benefit. Photo: Dickson Lee
Gary Ng Cheuk-yan, a senior economist at Natixis Corporate and Investment Bank, said he expected the economy to grow by about 4 per cent for the full year, but warned that recovery would remain uneven and could lose momentum without a stronger revival in domestic demand.
“The biggest momentum came in the first quarter with a strong rebound in consumption and investment,” he said.
“AI-related exports have helped, but that doesn’t mean all sectors can benefit.”
He said “decent but uneven” economic growth had not led to higher household incomes or corporate profits, while elevated interest rates and persistent labour market challenges, including weak wage growth and job creation, had continued to bring a cautious outlook for consumption and investment.
“Growth will likely decelerate down the road unless domestic demand recovers more strongly,” he said.
HSBC Global Investment Research recently raised its forecast for Hong Kong’s economic growth this year to 4.5 per cent, up from 3.8 per cent, putting its projection at the upper end of the government’s revised range.
But it maintained its 2027 forecast of 3 per cent.
HSBC said it expected consumption to remain steady amid a recovering property market, rising numbers of visitor arrivals and an increase in mega-events.
Investment would also be supported by accelerated infrastructure development, particularly the Northern Metropolis, as well as public funding through government bond issuance and transfers from the Exchange Fund, it said.
