OUTLOOK: Hong Kong Q1 GDP minus 1.5 pct, plus 2.4 pct

HONG KONG (AFX-ASIA) - First-quarter GDP is expected to come in at between a negative 1.5 pct and growth of 2.4 pct year-on-year, well down from a growth of 6.8 pct in the fourth quarter, on the back of slowing exports and very cautious domestic consumption, economists said.

	    They said they have been progressively cutting their 2001 GDP forecasts and expect the government to follow suit soon, with its growth estimate of 4.0 pct no longer achievable given the slowdown in the regional economies and weak private consumption coupled with a high base comparison for last year.

	    GK Goh vice president S.W. Chu said he is looking at a 2.4 pct year-on-year growth in the first quarter.

	    "I think it is going to be low due to the high base of comparison; retail sales in the first quarter are not that good and exports are on the decline," he said.

	    First quarter 2000 GDP rose 14.1 pct year-on-year.

	    Chu sees private consumption growth of 2.5 pct in the first quarter, against 5.4 pct for 2000, with total exports up only 7.1 pct against 17.1 pct for all of last year.

	    Chu, whose full-year 2001 GDP forecast is a growth of 3.5 pct, said he believes the government is considering revising downwards its official estimate while expecting a later improvement in line with the pick-up anticipated in the U.S.

	    "The major reason for GDP growth to decline is due to the external sector not doing very well, private consumption being still at low levels and the high base effect.

	    "Basically there is a bit of decline in all components contributing to GDP.

	    "It is very difficult for the first quarter export numbers to do well with the U.S. and Hong Kong's major trading partners not doing well. China's exports are also weak," Chu said.

	    Marvin Wong from ABN AMRO estimates first quarter GDP at not "beyond 2.0 pct," with the key issue being consumption growth.

	    "The wild card is consumption. In the fourth quarter (last year), it was minus 2.9 pct on a quarter-on-quarter basis. We therefore expect the trend to continue but figures indicate that the numbers are better."

	    However, even with very good consumption, first quarter GDP growth is not expected to be higher than 2.0 pct year-on-year, he said.

	    Wong forecasts 1.5 pct growth in 2001 GDP, based on the slowdown in the services sector, the high base effect and weak regional growth, among others.

	    The 2001 growth forecast is based on the U.S. seeing a 'V'-shaped recovery in the second half, Wong said, adding that a lot of brokerages have been cutting their full-year GDP forecasts for Hong Kong to below 4.0 pct.

	    Man Chan Wah of Worldsec Securities is looking at a 1.5 pct contraction in first-quarter GDP growth for Hong Kong, with slowing exports the main factor, leaving domestic consumption to take up the slack if possible.

	    Although consumption is still weak, it has been holding up as "pretty well as it can be expected," he said, adding that investment spending, which rose in 1999 and last year, especially in telecommunications and dotcoms, has also fallen.

	    Man also believes the government will be revising downwards its GDP forecast soon.

	    "I don't know anyone out there who has not revised (their full-year GDP forecasts) downwards," he said, adding that Hong Kong is only expected to see an economic recovery either at the end of this year or the beginning of 2002.

	    First-quarter GDP data are due out this Friday.

Related stock : (NIL)