Chapter 3
The Economy
The Hong Kong economy attained only modest growth in 2012, mainly slowed by sluggish external demand amid an austere global economic environment. Domestic demand nevertheless continued to display resilience and helped keep the unemployment rate at low levels. In tandem with the slower local economic growth and reduced external price pressures, inflation tapered progressively in 2012.
The Hong Kong economy showed a sub-par performance throughout 2012, having decelerated noticeably since mid-2011. Merchandise exports remained the weakest spot, amid a challenging external trading environment characterised by the unsettled euro debt crisis and the fragile recovery of the major advanced economies. Exports of services likewise slowed despite the further notable growth of inbound tourism. Yet the domestic sector fared rather well, with both consumption and investment attaining solid growth.
In 2012, the Gross Domestic Product (GDP) expanded by 1.4 per cent in real terms, moderating from the 4.9 per cent growth in 2011. In terms of the quarterly profile, real GDP posted an anaemic year-on-year growth of 0.8 per cent in the first quarter, before picking up to 1 per cent, 1.4 per cent and 2.5 per cent respectively in the second, third and fourth quarters, aided in part by the base effect and in part by some stabilisation of the euro debt crisis as well as the faster growth of the Mainland economy towards the year-end.
On a seasonally adjusted quarter-to-quarter comparison, real GDP grew by 0.4 per cent in the first quarter, fell back by 0.1 per cent in the second quarter, rebounded by 0.8 per cent in the third quarter and grew further by 1.2 per cent in the fourth quarter (Chart 1).
Total exports of goods saw only a small increase in 2012, with widespread weaknesses seen across almost all the major markets, as the recession of the eurozone economy and tepid recovery of the US economy weighed heavily on the production activity and trade flows of export-dependent Asia. But as the global environment stabilised towards the year-end, merchandise exports rebounded visibly in tandem.
Exports of services also moderated in growth. While exports of transportation and trade-related services were lacklustre amid the slowdown in goods trade, those of financial and business
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