Hong Kong finance chief Paul Chan says economy ‘doing OK’ as GDP rises by 3.8% The decision by Hong Kong banks to follow the US Federal Reserve’s interest rate cut will help the city’s economy by easing loan repayments for mortgage holders, the finance chief has said. Financial Secretary Paul Chan Mo-po’s remarks came as figures released on Friday showed Hong Kong’s gross domestic product (GDP) rose by 3.8 per cent in the third quarter year on year. “I welcome the rate cut, as it could lower the pressure on residents and businesspeople paying their mortgages,” Chan told the Post in an interview in Riyadh. He was referring to the recent move by Hong Kong’s major banks that saw them reduce their prime lending rates in some cases to a historic low of 5 per cent. According to the Census and Statistics Department’s advance estimates, the city’s GDP increased by 3.8 per cent in real terms in the third quarter compared with the 3.1 per cent year-on-year increase in the second quarter. The department also revealed retail sales jumped by 5.9 per cent in September to HK$31.3 billion from the same period last year, the best performance since December 2023. This followed revised growth of 3.9 per cent year on year in August. A government spokesman pointed to a continued surge in exports and sustained expansion in domestic demand, propelled by strong demand for electronic-related products and buoyant regional trade flows. “Coupled with a gradual recovery in consumption confidence and also a visible improvement in business sentiment from earlier this year, these developments should lend support to local consumption and investment activity,” he added. In the interview, the finance chief said authorities had been observing the Federal Reserve, noting that Hong Kong’s interest rates should align with the American rate cuts due to the linked exchange rate system between the Hong Kong and US currencies. The Hong Kong Monetary Authority cut the base rate to 4.25 per cent on Thursday morning, hours after the Federal Reserve pared its target rate by the same margin to a range of 3.75 to 4 per cent during the seventh meeting of the Federal Open Market Committee this year. Chan added that the Federal Reserve’s rate cut provided the city with the conditions to lower the rate. But he cautioned that the scope for local rate cuts depended on the size of the city’s own capital pool. He cited a past example of the US previously changing its interest rates, with Hong Kong having ample liquidity to follow on a smaller scale. On the overall economic situation, he said that “GDP is OK”, citing a positive signal from the buoyant initial public offering market. But he conceded that Hong Kong was undergoing an economic transition and noted the catering and construction sectors were facing “relatively severe” challenges. “We are highly cautious about the unemployment rate, since the city’s jobless rate has recently risen to 3.9 per cent between July and September,” he said. Leah Fahy, a China economist at Capital Economics, said in an analysis on Friday that seasonally adjusting the data suggested strong investment growth, not consumption or exports, was the key driver. Fahy added that a strong pick-up in construction activity, perhaps driven by government efforts to increase public housing supply, appeared to be the key factor. The note also said that export growth had contracted by 2.2 per cent quarter on quarter, after holding up well against US tariffs in the second quarter. Retailers echoed the weakness in local consumption highlighted in the analysis, noting that the market remained challenging despite a high-profile “Double 11” shopping festival in November. Bond Law, executive director at the Hong Kong Retail Management Association, said that while the trade body was “cautiously optimistic” for November, many retailers were relying heavily on discounts. “We see that for online stores, nearly 90 per cent of companies plan to launch online discounts,” Law said, citing a recent association survey. Law added that, in contrast, for physical shops, only about 48 per cent planned to offer discounts for the festival. He said that only about 55 per cent expected a sales increase of up to 20 per cent, indicating that “physical retail stores are actually facing considerable challenges”. https://www.scmp.com/news/hong-kong/hong-kong-economy/article/3330985/interest-rate-cut-hong-kong-banks-ease-loan-repayments-finance-chief (ICE HONG KONG)

Fonte notizia: South China Morning Post