The Hong Kong economy achieved strong expansion in the first quarter of 2026, with the real GDP growing by 5.9% annually.

The Hong Kong Special Administrative Region Government today (May 15) released the "2026 First Quarter Economic Report" and revised figures for the Gross Domestic Product (GDP) in the first quarter of 2026. The Hong Kong government's economic advisor, Fan Wan-er, explained the economic performance in the first quarter of 2026, as well as the latest forecasts for the full-year 2026 GDP and prices. Driven by strong performance in external trade and strengthening local demand, the Hong Kong economy expanded strongly in the first quarter of 2026. Real GDP grew by 5.9% year-on-year in the first quarter, accelerating from the 4.0% growth in the previous quarter. Seasonally adjusted, real GDP rose by 2.9% quarter-on-quarter. Driven by sustained demand for electronic products related to artificial intelligence and brisk intra-Asia trade, overall goods exports surged by 23.7% year-on-year in the first quarter. The output of services continued to expand robustly by 3.5% year-on-year, with all major service categories showing broad growth. Local demand strengthened in both consumption and investment. Private consumption expenditure accelerated in the first quarter, growing by 4.9% year-on-year, reflecting a more solid recovery in household consumption. With the economy growing strongly, overall investment spending continued to expand at a double-digit rate in the first quarter, rising by 17.7% year-on-year. The labor market saw slight improvement in the first quarter. Seasonally adjusted unemployment rate fell by 0.1 percentage point from the previous quarter to 3.7% in the first quarter. Underemployment rate also decreased by 0.1 percentage point to 1.6%. Average employment income continued to grow year-on-year in the first quarter. The local stock market showed mixed performance each month in the first quarter. The Hang Seng Index reached a four-and-a-half year high near 28,000 points in January, traded sideways in February, and saw a correction after the Middle East conflict in March. Trading and fundraising activities remained strong during the quarter. As for more recent developments, since the beginning of the second quarter, the Hang Seng Index has largely recovered earlier losses and returned to pre-conflict levels. Additionally, the residential property market continued to strengthen in the first quarter with further price and rent increases. Consumer price inflation remained mild in the first quarter, although it slightly accelerated in March, mainly driven by components related to fuel, reflecting the impact of rising international oil prices. Price pressures for other components were generally under control. The Composite Consumer Price Index rose by 1.4% year-on-year in the first quarter, compared to a 1.1% increase in the previous quarter. Looking ahead, the economic outlook for Hong Kong remains robust. Strong global demand for advanced electronic and AI-related products is expected to support goods export performance. Meanwhile, with continued robust inbound tourism, vibrant cross-border financial activities, and stable demand for commercial services, service outputs are likely to remain steady. A relatively buoyant consumer sentiment and resilient business prospects are expected to support local demand. The impact of the Middle East conflict on the Hong Kong economy has been limited so far. However, the outcome of the conflict remains highly uncertain. If the situation escalates further or continues to be tense, it may exacerbate global financial market volatility, posing downside risks to growth and upside risks to inflation. Considering the stronger-than-expected performance in the first quarter and potential short-term adverse factors in the external environment, the forecast for the full-year real GDP growth in 2026 is maintained at 2.5% to 3.5% as announced in the Budget. The downside risks to economic growth have increased due to uncertainty about the scale and duration of the Middle East conflict. For the inflation outlook, the continued rise in international oil prices is expected to transmit to fuel-related components of consumer prices in the coming months. However, overall inflation in Hong Kong is expected to remain relatively stable, reflecting Hong Kong's service-oriented economy, low energy intensity, and steady energy supply from Mainland China, which helps mitigate external shocks. Considering the actual inflation situation in the first quarter and the factors mentioned above, the forecasts for the headline and underlying consumer price inflation rates in 2026 are revised upwards from 1.7% and 1.8% as announced in the Budget to 2.5% and 2.6%. The Hong Kong government has introduced short-term targeted measures in the past two months to provide timely support to industries facing high fuel costs. The government remains vigilant about the risk of further escalation in the conflict, closely monitoring developments and will take further appropriate responses as needed to maintain price stability.