Hong Kong Weathers War Shocks With Fastest Growth Since 2021

The Kwai Tsing Container Terminals in Hong Kong. Photo by Leung Man Hei /Bloomberg

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(Bloomberg) — Hong Kong’s economy expanded at its fastest pace in almost five years despite a global energy crisis unleashed by the war in Iran, thanks to an insatiable global demand for artificial intelligence along with an uptick in both consumption and investment.

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Gross domestic product climbed 5.9% in the first quarter from a year earlier, according to an advance estimate released on Tuesday by the city’s Census and Statistics Department, exceeding China’s growth for the first time since the pandemic. 

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The figure topped the forecasts of all economists in a Bloomberg survey and marked an acceleration from 4% in the final three months of 2025.

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As the conflict in the Middle East upends markets and global supply chains, Hong Kong has seen signs of strength in traditional pillars of its economy such as tourism, with property prices also starting to recover after a prolonged downturn. At the same time, Asia’s financial hub is vulnerable to the historic oil shock triggered by the war since it imports nearly all of its energy and relies on fossil fuels for power generation.

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“The momentum does not come without risks,” said Gary Ng, a senior economist for Asia Pacific at Natixis SA. “Uncertainty about Iran may lead to higher interest rates,” and questions remain about Hong Kong’s “limited job creation” and “whether the rebound in equity and home prices will continue,” he added. 

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The pickup last quarter was driven by strong global demand for AI-related electronics, a government spokesperson said in a statement.

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“Looking ahead, Hong Kong’s economic growth outlook remains positive,” the spokesperson said, while warning of “persistent tensions in the Middle East” as downside risks to the economic outlook.

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Private consumption gained 5% in real terms in the first quarter from a year earlier, double the pace of its increase in the prior three months. Investment rose close to 18%, six percentage points faster than the previous quarter’s jump.

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Ng said the economy is benefiting from a so-called wealth effect — the tendency for spending to increase as people enjoy gains in a booming market. Share listings in Hong Kong have raised more than $13 billion in the first three months, notching their best quarter since 2021, largely as the result of a record January.

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Tourism is also playing an increasingly important role, even as the number of arrivals remains well below their level in early 2019, before anti-government street protests and Covid roiled the sector.

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The city saw more than 14.3 million visits between January and March, an increase of 17% from last year and the highest since the pandemic.

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A global investment boom in AI and disruptions caused by the Iran war also led to skyrocketing imports, as companies stockpile supplies. 

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Last quarter, Hong Kong’s purchases of foreign goods grew by nearly 30% in real terms, according to the government statement, compared with an increase of just over 18% in the previous three months. Exports also jumped and rose almost 24%.

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The transshipment hub is a gateway for many goods headed to mainland China, which saw a recent surge of imports of semiconductors and AI computing hardware. 

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(Updates with more details.)

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