“Looking ahead, the difficult external environment will continue to pose pressures on Hong Kong’s exports of goods in 2024. The situation may stabilise later in the year if advanced economies cut interest rates as expected,” he said.

The full-year GDP figure was in line with the 3.2 per cent forecast by Financial Secretary Paul Chan Mo-po in November, leaving the economy’s performance short of the government’s earlier estimate of 4 to 5 per cent growth.

On a quarterly basis, the economy improved 0.5 per cent in the fourth quarter from the previous one.

During the fourth quarter, private consumption further rose 3.5 per cent over a year earlier, after a 6.2 per cent surge in the previous three months. Government expenditure dropped 5.2 per cent in the last three months of the year.

For the whole of 2023, private consumption surged 7.4 per cent year on year, while government expenditure declined 4.3 per cent compared with 2022.

Samuel Tse Ka-hei, an economist and strategist with DBS Hong Kong, said the rebound in private consumption was still relatively slow despite the city seeing mild economic growth in the fourth quarter.

“The declines in both the real estate and stock markets are making residents find it difficult to make money through stocks and by selling property. Particularly in a high-interest environment like this, people are hesitant to spend money,” Tse said.

“Another issue is that the import of services has been growing faster than the export of services for consecutive quarters, indicating that we spend more when we go abroad, while fewer people come here to spend money.”

Hong Kong recovered slowly from the pandemic on the back of weak global demand, intensifying geopolitical tensions and mainland China’s sluggish economy.

The city’s exports plunged 7.8 per cent last year compared with 2022, even after a rebound in growth in the fourth quarter following a prolonged contraction.

Hong Kong exports jump by 11% in December, but full-year figure down by 7.8%

In terms of tourism, 33.9 million people visited the city last year, about 55 per cent of the average across 2017 and 2018.

“Visitor arrivals should increase further as handling capacity continues to recover, with an additional boost from the government’s efforts to promote mega events,” the government spokesman said.

“Together with the government’s various measures, rising household income should continue to support private consumption.”

Thomas Shik Chun-sing, head of economic research and chief economist at Hang Seng Bank, said he anticipated further recovery in the city in 2024 and predicted a 2.8 per cent growth rate for the entire year, given Hong Kong’s external trade prospects still faced challenges.

“We believe that the anticipated rate cuts by the US Federal Reserve later in the year will provide additional support to Hong Kong’s economy in the second half,” Shik said.

“Currently, our forecast suggests that the Federal Reserve will implement three to four rate cuts of 25 basis points each throughout the year.”

Twenty-five basis points is a quarter of a percentage point.

Over the past five years, Hong Kong’s economy contracted three times.

In 2021, the economy rose 6.4 per cent following contractions of 6.5 per cent in 2020 and 1.7 per cent in 2019.