HONG KONG – Hong Kong's economy has experienced its strongest quarterly growth in nearly five years, propelled by relatively solid business and consumer sentiment to continue supporting domestic demand.

The city’s gross domestic product (GDP) grew 5.9 percent annually in the first quarter of this year, accelerating from the revised 4 percent growth rate in the fourth quarter of last year, according to advance estimates released by the Census and Statistics Department of the special administrative region government.

On a quarter-to-quarter basis, the SAR economy expanded 2.9 percent.

Analyzed by major GDP component, private consumption expenditure hiked 5 percent annually in the first quarter of 2026 while government consumption expenditure increased 2.9 percent in the period.

Gross domestic fixed capital formation increased further by 17.7 percent annually during January to March, following the increase of 11.7 percent in the fourth quarter of 2025.

Total exports of goods swelled 23.8 percent annually in the first three months of 2026, accelerated further from the growth of 15.4 percent in the preceding quarter. Exports of services rose 3.5 percent year-on-year in the period.

“Hong Kong's economic growth outlook remains positive, underpinned by strong global demand for artificial intelligence-related electronics, sustained growth in visitor arrivals and robust cross-boundary financial activities,” a SAR government spokesman said in a statement on Tuesday, adding that the government expects relatively solid business and consumer sentiment to continue supporting domestic demand.

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But the spokesman cautioned that persistent tensions in the Middle East pose downside risks to the economic outlook. “The government has taken targeted measures to safeguard energy supply stability and mitigate the impacts on affected sectors and we will stay vigilant and continue to closely monitor the developments.”

Various financial institutions from banks to asset managers based in the special administrative region raised this year’s GDP forecast at the high end of the government’s estimate between 2.5 percent and 3.5 percent.

Hang Seng Bank said it will upgrade its economic growth forecast for Hong Kong this year to 3.1 percent from the original forecast of 2.5 percent, as both improved domestic and external sectors are expected to support overall growth.

“We anticipate continued gains in asset markets will further bolster consumer sentiment, supporting sustained growth in consumption demand. We believe the drive for trade diversification among key regional players will provide ongoing support to the city’s external trade sector over the medium term,” said Hang Seng Bank Chief Economist Kelvin Lau.

Swiss asset manager UBS maintained that Hong Kong’s GDP growth for 2026 will be 3.3 percent, supported by export growth in artificial intelligence and related sectors, a revival in housing transactions and higher home prices, increased fiscal revenues from stamp duty, and stabilization and gradual recovery in consumption.

“If there are unexpected shocks to the economy again, we believe the government could still use the resilient fiscal reserve to offer counter-cyclical support if necessary,” UBS economist William Deng noted.

Eric Zhu, an economist at Bloomberg Economics, forecast that Hong Kong’s economy would expand 3.4 percent this year: “Rising optimism tied to DeepSeek-style breakthroughs lifted the stock market. A rebound in home prices from the bottom also lifted confidence. AI-related equipment drove export growth despite headwinds from higher US tariffs.”

However, Standard Chartered Bank (Hong Kong) predicted that Hong Kong’s economic growth will moderate to 2.5 percent this year – at the government’s lower range of forecast.

Local sentiment and goods export growth could be affected by prevalent geopolitical risks, trade policy uncertainty, and the prospect of US Federal Reserve rate moves, the bank said, while the new residential flat supply may keep Hong Kong’s property price rise in check.