Real GDP growth reached 6.8% in 2010, its fastest rate since 2006, as the economy rebounded following the 2008-09 global financial crisis. Growth will decelerate to 5.3% in 2011 and an average of 4.6% a year in 2012-15. The main contribution to growth in the forecast period will continue to come from private consumption. This largely reflects the continued bright outlook for jobs, which in turn is supported by our forecast of rapid growth in exports throughout 2011-15: brisk growth in overseas sales will create employment in sectors such as shipping and logistics, catering, retailing, tourism and professional services. Gross fixed investment will continue to be supported by a recovery in business investment and property development as companies take further advantage of loose credit conditions, as well as by major public infrastructure projects, such as the Hong Kong-Macau-Zhuhai bridge.

A continued positive contribution from net exports will also boost growth directly in 2011-15. Our expectation of strong external demand is based largely on the rosy outlook for exports to China (particularly on the services side, which includes tourism earnings), as well as to other emerging markets. Strong demand from these markets will help to compensate for any weakness in demand in Hong Kong's traditional markets in the developed world. Imports will grow strongly, in line with trends in domestic demand, as Hong Kong produces few of the raw materials or manufactured goods that it consumes. We forecast that both exports and imports of goods and services will expand by 7-8% a year on average in the forecast period.

There are several risks to our forecast, the largest of which relates to the uncertain global outlook. Although the world economy is recovering, an earthquake that struck Japan in March (and the ongoing crises at several nuclear reactors that were damaged by the natural disaster) have highlighted the vulnerability of major economies to unexpected events. Financial volatility poses further threats to international economic stability. Hong Kong's economic growth is closely correlated with global trade expansion, and exports (as well as the wider economy) would be hit hard should the developed world suffer another recession. The territory's economic outlook is also closely linked to that of China: there is a positive correlation between growth on the mainland and in Hong Kong.

Download the numbers in Excel