Hong Kong's economy kept its strong upturn momentum in the first quarter of 2006, with the gross domestic product (GDP) expanding 8.2 percent in real terms, well beyond expectation, revealed latest statistics in Hong Kong Tuesday.

On a seasonally adjusted quarter-to-quarter comparison, Hong Kong's economy has expanded for the 11th straight quarter, by 2.4 percent in real terms in the first quarter.

The Hong Kong Special Administrative Region government economist Kwok Kwok-chuen said at a press conference on Tuesday that given the exceptionally strong GDP growth in the first quarter, Hong Kong's economy should have little difficulty in attaining the forecast GDP growth of 4-5 percent as released in the Budget.

Although the global economy continued to show a strong performance in the first three months, the economist said the external environment is still clouded by downside risks like recent oil prices hikes, rising U.S. interest rates, avian flu, global trade imbalances and macro control measures on the Chinese mainland.

"Some of these risks have intensified recently. How these various risk factors will play out is critical to Hong Kong's trade and economic performance in the coming quarters," Kwok said.

"In view of the wide range of uncertainties still prevailing in the external environment as well as the recent volatilities in the international financial markets, it is more prudent to maintain the forecast GDP growth for 2006 unchanged at 4 percent to 5 percent in the present round," he said.

The economy in the first quarter expanded on a broad front, driven by robust external trade, distinct pick-up in consumer spending, and a continued surge in investment in machinery and equipment.

Merchandise exports grew 14.4 percent in real terms over the same period a year earlier, thanks to surging intra-regional trade, with the Chinese mainland as the key growth driver.

Exports to the European Union and the United States were also strong, bringing the services exports up 8.9 percent in real terms in the first quarter, with both offshore trade and inbound tourism growing further.

On the domestic front, spending on private consumption went up 4.5 percent in the first quarter, supported by improving employment incomes, a stronger household balance sheet along with higher share prices and a reviving property market.

Consumer sentiments remained upbeat, even though interest rates rose further during the quarter.

Overall investment spending rose 8.5 percent in real terms as expenditure on machinery and equipment remained the key growth driver, with 23.3 percent growth, supported by higher corporate profits, briskly expanding business volume and a sanguine economic outlook.

Yet building and construction activity was still the laggard.

Labor market conditions continue to improve, with the seasonally adjusted unemployment rate falling to 5.2 percent in the first quarter and further to 5.1 percent in February-April.

Since 2003, some 240,000 additional jobs have been created while the number of long-term unemployed has also come down, indicating that many of those who had difficulties in finding jobs in the past are now being absorbed back into the labor market gradually.

Consumer price inflation remained benign, running at 1.6 percent year-on-year in the first quarter.

The successive rises in private housing rentals over the past two years have begun to creep into consumer prices to a greater extent. Yet inflationary pressure has been mitigated by the easing in import prices of food and consumer goods.

Investment in plants and equipment seems likely to increase further in tandem with the much improved corporate profits and also to cater for the growth in business. But construction is likely to remain weak in the near term, thereby capping the upside of overall investment.

Source: Xinhua