Country Economic Forecasts > Hong Kong China

The economy shrank by 0.4% on the quarter in Q1, the largest contraction in nearly five years. Consumer spending, generally the key driver of growth, fell for a third consecutive quarter, while investment dipped further in Q1.On the external front, exports remained weak. Indeed, exports of services have fallen in each of the last four quarters. However, net trade contributed positively to GDP in Q1 because imports fell more than exports.But looking forward, the labour market remains fairly solid, fiscal policy is now providing support and asset prices are expected to stabilise. As a result, we expect consumer spending to pick up modestly during the remainder of 2016. However, the uncertainties associated with external demand (particularly from Mainland China) and further rises in US interest rates in H2 will be a drag on local sentiment and activity. We now expect GDP growth of 0.7% for 2016 as a whole, down from 1.3% previously.