Hong Kong's economy grew a seasonally adjusted 0.6 percent in the third quarter from the second, better than expectations, which helped the trade-dependent territory avoid a recession as its exports regained traction amid the global slowdown.
But the government said Hong Kong's trading environment was still subject to a high degree of uncertainty and revised its full-year 2012 GDP forecast to 1.2 percent from 1-2 percent, down sharply from 4.9 percent expansion in 2011.
Global economic turmoil and a slowdown in China have weighed on Hong Kong's economy, but analysts are more optimistic about the outlook for the financial centre on the back of encouraging data from China, which may help lift the city's export and retail sectors.
A flurry of Chinese data, from factory output, investment to trade last week, signalled the world's second-largest economy had turned a corner.
On a year-on-year basis, Hong Kong's gross domestic product (GDP) growth edged up 1.3 percent, compared with 1.2 percent expansion in the second quarter.
The pick-up in Hong Kong's economy is a combination of base effect, China recovery, slight recovery in the U.S. as well as iPhone5 and other technical gadget shipments, said Citi Group analyst Adrienne Lui, who expects full-year growth of 2.2 percent.
We do expect a bit more of a recovery at the end of the year, as trade gradually recovers in the region, some liquidity push to the system and therefore better sentiment, she said.
Exports in the former British territory in September grew 15.2 percent from a year earlier, recovering from 0.6 percent growth in August as demand from mainland China and the United States picked up.
The seasonally-adjusted third-quarter data was stronger than t he average forecast of four analysts who expected GDP to grow 0.13 percent from the previous quarter, when the economy contracted 0.1 percent.
Hong Kong's data followed better-than-expected October export figures from China, where export growth hit a five-month high above 11 percent, boding well for the city's trade sector, which is predominantly re-exports to and from mainland China.
Activity in the mainland economy has shown signs of re-acceleration in the more recent months, which should lend support to intra-regional trade going forward, the Hong Kong government said in a statement.
Reuters surveyed 25 analysts last month and the average estimate for economic growth this year was 1.8 percent.
Consumer and asset prices in Hong Kong have been under pressure recently as funds unleashed by quantitative easing measures in the United States, Europe and Japan continue to pour into the city of more than 7 million people.
The Hong Kong Monetary Authority has intervened in currency markets to curb the strength of the Hong Kong dollar under the peg regime.
The government raised the forecast for full-year headline consumer price inflation to 3.9 percent from 3.7 percent, while underlying inflation was revised to 4.5 percent from 4.3 percent.
The headline CPI in September accelerated to 3.8 percent, but the government had said the austere economic environment and more moderate increases in import prices should help to contain inflation for the rest of the year.