HONG KONG: Economists are scrambling to revise upwards their growth forecasts for the city's economy as the strong rally in the financial market boosts domestic consumption and restocking in developed economies stokes exports.

Providing data supporting the revised predictions, economists at the University of Hong Kong (HKU) yesterday raised their growth forecast for this year significantly to -3.1 percent from -5 percent it projected just three months ago.

The sharp upward adjustment is based on the expectation that the economy will have sustained positive quarter-on-quarter growth from the second quarter, through the 3rd [for which data are not yet available] and to revert to a 1.0 percent year-on-year expansion for the fourth quarter.

"Given the recovery of the global economy, pickup in export orders, massive fiscal stimuli, low interest rates and ample liquid funds, the Hong Kong economy has started to recover in the second quarter, and the healing process is projected to continue," said Richard Wong Yue-Chim, an economics professor at HKU.

The city's GDP reverted to a growth rate of 3.3 percent in the second quarter after contracting for four consecutive quarters, the government announced earlier.

"The growth momentum is holding up with the corresponding (quarter-on-quarter) growth rates estimated to be 0.9 percent and 1.3 percent in the third and fourth quarter respectively," said Dr. Alan Siu, Director of the APEC Study Center at HKU.

The HKU economists are also optimistic about the growth prospects for next year, expecting the economy to expand at least 3-4 percent.

Qu Hongbin, HSBC's China chief economist, Tuesday also significantly raised his growth forecast for Hong Kong next year to 3.8 percent from 2.4 percent estimated previously, citing improving demand by developed economies for export goods.

He noted that new orders received by mainland manufacturers have been rebounding strongly since the third quarter, benefiting the Hong Kong economy as well, since a large chunk of mainland exports are shipped through the city.

Meanwhile, DBS Bank has also become more optimistic about the prospects for the local economy, citing strengthening private consumption.

"Consumption will likely continue to improve on the wealth effect of the strong rally in financial and property markets as well as the stabilizing unemployment situation," Daniel Chan, senior investment strategist at the bank, told China Daily last week.

The bank has upgraded its growth forecast for the local economy this year to -2.4 percent from -6.4 percent estimated previously. It has also raised its forecast for 2010 to 5.5 percent from 2 percent previously, citing the commencement of more public infrastructure projects and a steady recovery in private investment as additional growth factors.

(HK Edition 10/08/2009 page4)