The median forecast of 12 analysts compares with a 2.6 percent gain in the fourth quarter of 2009 from a year earlier. The latest figure will be released at 4:30 p.m. local time today.

China’s economic comeback is driving the city’s growth, via a record 5.5 million visitor arrivals from the nation in the first quarter, inflows of capital and demand for exports. Hong Kong’s government aims to prevent a property bubble from emerging and is monitoring the threat that Europe’s sovereign- debt crisis will undermine the global recovery.

“Hong Kong certainly is benefiting from the strength of the Chinese rebound,” said David Cohen, a Singapore-based economist at Action Economics. “Everybody’s holding their breath on the European problem, it can’t be ignored as a risk to Hong Kong and the rest of Asia.”

Today’s number will be flattered by the comparison with a 7.8 percent contraction in the same period in 2009, the biggest decline in a decade. Growth may slow in coming quarters, according to Hang Seng Bank Ltd.

While Europe grapples with containing the Greek debt crisis, the International Monetary Fund says Asia faces overheating and asset-bubble risks from inflows of capital.

Cooling Property Market

In Hong Kong, the government’s first land auction of the fiscal year on May 11 fetched almost a third less than surveyors’ estimates, suggesting that government efforts to prevent a property bubble may be working. Officials are boosting the supply of land and raised the stamp duty on luxury-home sales from April 1.

Home prices rose as much as 10 percent in the first four months of the year, according to Centaline Property Agency Ltd., after a 29 percent gain in 2009.

Gross domestic product may have expanded 2 percent from the previous three months, seasonally adjusted, according to the median estimate in a survey of five economists. That would be less than 2.3 percent growth on that basis in the fourth quarter.

The government forecasts full-year growth of as much as 5 percent after a 2.7 percent contraction in 2009. London-based Capital Economics Ltd. estimates a 2010 expansion of 6.5 percent.

Billionaire Li Ka-shing, who controls Cheung Kong (Holdings) Ltd. and Hutchison Whampoa Ltd., said March 30 that the medium- to long-term outlook for the city’s economy is “good.”

Regaining Some ‘Swagger’

“Hong Kong and indeed Asia has regained some of its swagger following the global financial crisis,” Financial Secretary John Tsang said April 26. The city needs to guard against over-confidence as the global economy remains “basically out of whack,” he said.

Asia has led the global recovery. The Chinese economy, the world’s third biggest, expanded 11.9 percent from a year earlier in the January-March period, the fastest pace in almost three years. Malaysia yesterday raised interest rates as the nation reported 10.1 percent growth for the first quarter.

“China’s recovery story has lifted Hong Kong’s economy, not only through trade but also through retail market sentiment and business confidence,” said Kelvin Lau, a Hong Kong-based economist at Standard Chartered Plc. Hong Kong’s outlook is clouded by Europe’s crisis and the possibilities of China tightening policies and of U.S. growth slowing, according to Lau.

Sliding Stocks

In Hong Kong, merchandise exports jumped 26 percent in the first quarter from a year earlier, retail sales gained 18.8 percent and the jobless rate slid to a 15-month low. Since the financial crisis began, officials have supported consumption and employment with tax cuts, subsidies, aid for the poor and infrastructure projects.

Still, the share market has been sliding this year and the benefits of Hong Kong’s rebound are yet to be felt by some of the city’s 7 million people.

The Hang Seng Index has declined more than 7 percent, after a 52 percent gain in 2009, on concern that the Chinese economy may slow and the debt crisis in Greece may spread. The benchmark fell 0.8 percent as of 10:26 a.m. local time today.

Unemployment of 4.4 percent in the first quarter remained higher than the 3.3 percent level before the global financial crisis deepened in late 2008. The number of people living in poverty increased in the first nine months of last year by 18.5 percent to 846,800 from the annual figure for 2008, according to a government report this week to a subcommittee of Hong Kong’s Legislative Council.

--Editors: Paul Panckhurst, Russell Ward.

To contact the reporter on this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net

To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net

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