Hong Kong's economic performance was worst since global crisis

1.5% GDP growth was downright depressing.

According to Moody's Analytics, Hong Kong’s economy slowed in sync with China’s through most of 2012, posting GDP growth of about 1.5%, the worst performance since the 2008-2009 global financial crisis.

Growth will strengthen in 2013, albeit at a slow and steady pace. The economy will benefit from China’s upswing, but fiscal showdowns in the U.S. and Europe this year will hold back world GDP growth and, by extension, Hong Kong’s overall performance.

Here's more from Moody's Analytics:

The forecast calls for 3.3% growth in 2013, an improvement on 2012, but still below the economy’s potential rate of around 4.5% to 5%. Given its tight links to global growth and financial markets, Hong Kong will remain susceptible to downswings in world demand and investor confidence. As the global outlook carries downside risk, so too do Hong Kong’s prospects.

Exports bottomed in July and have since been trending upward. The upswing may be bumpy through the first half of the year as uncertainty over U.S. fiscal policy and Europe’s sovereign debt crisis weigh on Western demand.

Overall, stronger growth in China, which accounts for more than half of Hong Kong’s trade, and Asia is expected to support a better export performance forHong Kong in 2013.

Hong Kong shows some domestic strength, particularly in the housing market, where prices are surging ahead. A mix of low interest rates, which are tied to the U.S., short supply, and strong interest from mainland China are driving up housing demand and prices. The positive boost to household wealth has helped to support private consumption, a trend that is expected to continue in 2013.

Wealth effects from a rising Hang Seng share market, which gained about 23% in 2012 to be one of Asia’s best performers, are also helping to lift the economy. Share ownership, both direct and via superannuation funds and other vehicles, is high in Hong Kong. The stock market tends to move in line with the economy, so a positive outlook should also help lift household wealth and willingness to spend.