This undated file photo shows a bird’s-eye view of Hong Kong. (PHOTO PROVIDED TO CHINA DAILY)

Hong Kong’s economy is on the path to recovery alongside improving global economic conditions and a receding local epidemic though economic recovery is still uneven and incomplete.

The city posted annual economic growth of 7.5 percent in real terms in the second quarter of 2021 over a year earlier, fueled by visible increases in domestic and external demand, according to the advance estimates released by the Census and Statistics Department on Friday. For the first half of 2021, GDP grew 7.8 percent from a year ago.　

On a quarter-to-quarter comparison, GDP decreased 1 percent in real terms in the second quarter of 2021 when compared with the first quarter of 2021, reflecting a slowdown in the export of goods following strong growth in the first quarter.      

While exports of goods surpassed the peak reached in the same period of 2018, tourism remained at a standstill due to the pandemic. Consumption-related activities improved further, but were still notably below their pre-recession levels. 

Census and Statistics Department, HKSAR govt

Among major GDP components, private consumption expenditure rose 6.5 percent annually in the same period; government consumption expenditure grew 2.9 percent; gross domestic fixed capital formation swelled 23.7 percent; total exports of goods jumped 20.3 percent; and exports of services increased 2.6 percent.

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“The economic recovery remained uneven in the second quarter,” a government spokesman said in the statement. “While exports of goods surpassed the peak reached in the same period of 2018, tourism remained at a standstill due to the pandemic. Consumption-related activities improved further, but were still notably below their pre-recession levels.”   

“The spread of more infectious COVID-19 variants in many places of the world continues to cast uncertainty over the global economic outlook. Other risk factors such as the China-United States relations, geopolitical tensions, and the evolving monetary policy stance of major central banks also warrant attention,” the spokesman added.

OCBC Wing Hang Bank Economist Carie Li agrees that Hong Kong’s economic recovery is still uneven and incomplete, saying, “For Hong Kong’s economy to show stronger recovery, further improvement in local consumption and the revival of exports of services are needed, when both of which will hinge on the pace of (a) vaccine rollout.”

Based on buoyant external demand, strong fiscal supports including e-consumption vouchers, and the assumption that border controls will be further relaxed in the second half of this year, the Hong Kong banking arm of the Singaporean OCBC Bank has upgraded GDP forecast for this year from 4.1 percent year-on-year to 5 percent to 6 percent year-on-year in 2021.

The Swiss-based investment bank UBS also raised its estimate -- from 5.3 percent to 7 percent.

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“Strong trade growth has been a key driver of recent GDP growth, but domestic growth drivers are likely to come to the fore. Improving employment conditions and an under-control COVID-19 situation should support a further improvement in domestic private consumption, creating the base for an upward growth spiral. We expect strong public investment growth to be sustained,” William Deng, an economist at UBS, said. 

Deng says he expects quarantine restrictions with the Chinese mainland to begin to ease in the autumn which should help support business confidence and improve private sector sentiment.

The revised GDP figures and more detailed statistics for the second quarter of 2021, as well as the revised GDP forecast for 2021 will be released on Aug 13.