The Hong Kong economy grew 4.1% in Q3 compared to the previous year, surpassing 1.5% growth in Q2 and 2.9% in Q1.

That said, the government has downwardly revised economic growth for the full year to 3.2% from a prior forecast of between 4.0% and 5.0%. Last year, Hong Kong’s economy contracted 3.5%, Reuters news agency reports.

Government economist Adolph Leung said growth should receive a boost from stronger household income, private consumption and the government’s support initiatives.

“The difficult external environment amid increasing geopolitical tensions and tight financial conditions would continue to weigh on exports of goods and investment and consumption sentiment,” Leung stated.

Furthermore, visitor arrivals during September reached 2.77 million, bringing the total for the first nine months of the year to 23.32 million, as per preliminary data from the Hong Kong Tourism Board. This compares to last year’s data, which reached 66,037 and 249,699, respectively

“Although Hong Kong will see support from consumption, the net tourism outflows ... and poor export performance will likely weigh on growth,” said Gary Ng, Asia Pacific senior economist at Natixis.

In addition, last week, Financial Secretary Paul Chan told global financial leaders during an investment summit that innovation and technology were key to fuelling growth.

Hong Kong’s economy grew 0.1% on a seasonally adjusted quarterly basis in Q3, compared to a 1.3% decline in Q2 and 5.4% growth in the first quarter.

However, downside risks may emerge from a challenging external environment, as exports remain under pressure due to weak demand from mainland China and across the globe, according to DBS economist Samuel Tse.

“After all, a solid recovery of asset markets and economy hinges crucially on a clear timeline of interest rates cuts,” Tse commented.

Hong Kong reduced its full-year underlying consumer price inflation forecast from 2.0% to 1.8% and also lowered the headline rate forecast from 2.4% to 2.2%.