Hong Kong’s economy contracted in the first quarter of the year as weak property market and low retail sales weigh on growth.
The economy fell 0.4 percent in the three months ending March, below the median forecast 0.1 percent growth. Year-on-year the economy expanded 0.8 percent, less than final quarter of 2015.
Hong Kong’s retail sales plunged for the thirteenth month in March as Chinese tourists continued to stay away. This year, Chinese visitors are expected to fall 3.2 percent, according to the Hong Kong Tourism Board, with about 4 percent drop in spending.
“At least over the next five to six months, we don’t see any positive growth driver that can help lift GDP growth substantially,” said Raymond Yeung, an economist at Australia & New Zealand Banking Group Ltd. in Hong Kong.
Hong Kong property sales slumped to 25-year low in February, while the number of the apartments worth less than their mortgages rose 15 times in the first quarter, Hong Kong Monetary Authority report showed.
“The external environment deteriorated during the quarter, characterized by subdued global growth and sharp gyrations in global financial and monetary conditions, leading to a deeper setback in both goods and services trade,” the government said. “The domestic sector also lost some momentum, as the weak global outlook with rising downside risks affected local economic sentiment.”
Goldman Sachs said it sees home prices plunging 20 percent through 2018, if interest rate is increased by 50 basis points market is expecting.