Hong Kong’s economy grew by 4.3 percent year on year in the second quarter of 2026, supported primarily by strong external trade, according to advance estimates released by the Census and Statistics Department. Although this marked a slowdown from the 5.9 percent expansion recorded in the first quarter, government officials expressed confidence that solid growth would continue throughout the remainder of the year.

Total exports of goods rose 28.8 percent in real terms compared to the same period last year, outpacing the 23.8 percent increase seen in the first quarter. Imports also rose significantly, increasing by 29.3 percent in the second quarter. Strong global demand for artificial intelligence (AI)-related products remained a key driver of merchandise exports. In June alone, exports jumped 53.4 percent year on year to a record HK$641.1 billion, marking the highest monthly growth since March 1984. Over the first half of 2026, exports climbed 39.1 percent compared to the prior year.

The government highlighted sustained growth in visitor arrivals and continued demand for financial and business services as important factors bolstering exports of services. Domestic demand was expected to stay firm, supported by a stable labour market and positive business and consumer sentiment. Monthly visitor arrivals in June reached 3.72 million, a 27 percent increase from a year earlier, reflecting the ongoing post-pandemic recovery.

However, external challenges remain. The government pointed to geopolitical tensions in the Middle East, uncertainties regarding U.S. monetary policy, and protectionist trade measures by major economies as risks that require close monitoring.

Economists noted that the moderation in growth partly reflected volatility linked to Hong Kong’s role as a re-export hub, where net trade contributions are difficult to predict. Junyuan Tan, regional economist at Coface, highlighted the impact of rising semiconductor prices driven by AI capital expenditure and defense spending, which complicates clear assessment of trade’s net effect on GDP. Tan also noted a recent softening in residential property sales amid uncertainty about future U.S. Federal Reserve moves.

The Fed kept its target interest rate steady at 3.5 to 3.75 percent in late July, with the Hong Kong Monetary Authority similarly holding its base rate at 4 percent. While domestic consumption is expected to continue benefiting from labour market stability and rebounding tourism, a more hawkish U.S. monetary stance could pressure local asset prices and investment confidence, Tan said.

Lee Shu-kam, head of economics and finance at Hong Kong Shue Yan University, observed that the gradual stabilization of property and stock markets had bolstered consumer confidence, though outbound travel by residents might weigh on local spending. Lee added that government spending might be cautious due to lower land sale revenues but anticipated ongoing support for infrastructure in the Northern Metropolis and investments in AI and technology sectors.

Capital Economics’ Leah Fahy pointed to an almost 8 percent quarter-on-quarter decline in investment growth as a key factor in the slower GDP expansion. She attributed this to a cyclical downturn in machinery and equipment purchases after a surge in the first quarter. Fahy noted that despite the import surge offsetting export gains and creating a net drag on growth, the overall recovery appears intact.

Coface projected Hong Kong’s economy to expand by 3.3 percent in 2026, suggesting the government is likely to maintain its official growth forecast range of 2.5 to 3.5 percent for the year.