ENG-2010 — Page 84

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Chapter 3

The Economy

The Hong Kong economy emerged swiftly from the 2009 global recession triggered by the financial crisis, achieving a full- fledged upturn in 2010. The external and domestic sectors both fared strongly and the labour market improved. Inflation rose, however, mainly due to higher import prices. Domestic prices also rose along with the robust economy.

2010 was a year of broad-based expansion for the Hong Kong economy, marked by flourishing exports, vibrant inbound tourism, strong consumer spending, and a bounce-back in investment. For 2010 as a whole, the Gross Domestic Product (GDP) expanded by 6.8 per cent in real terms, more than offsetting the 2.7 per cent contraction in 2009.

Economic activities sustained strong momentum throughout the year. On a year-on-year comparison, real GDP leaped by 8.1 per cent in the first quarter of 2010, 6.4 per cent in the second quarter, 6.7 per cent in the third quarter, and a still notable 6.2 per cent in the fourth quarter even against a higher base of comparison. On a seasonally adjusted quarter-to-quarter comparison, real GDP expanded solidly throughout the four quarters, by 1.8 per cent, 1.7 per cent, 0.9 per cent and 1.5 per cent respectively (Chart 1).

Merchandise exports sprang back sharply in 2010 from the plunge triggered by the collapse in global trade flows in early 2009. Vibrant growth in the Asia region, particularly the Mainland, provided the main impetus. Reviving demand from the advanced economies also contributed, although exports to these markets had yet to return to their pre-crisis levels.

Exports of services maintained strong growth across the board in all four quarters, amid buoyant inbound tourism, flourishing trade flows, and thriving fund-raising and other commercial activities.

The domestic sector also held up well. Private consumption expenditure was strong throughout the year, supported by improving labour market and income conditions. Investment staged a notable rebound amid sanguine business sentiments.