This is definitely good news

Pieter Van Der Schaft, Barclays Capital

A strong export performance helped the economy to expand by 3.3% compared with a year earlier.

The economy grew by 2.5% from the previous quarter.

The figures were much better than most analysts had expected, and led the government to increase its growth forecast for 2002 to 2% from 1.5%.

"This is definitely good news," said Pieter Van Der Schaft of Barclays Capital in Hong Kong.

"Hong Kong has gone through a lot of restructuring over the last five years and externally we are very competitive," he added.

Exports and tourism up

Goods exports jumped by 11.4% in the quarter, the first double-digit growth figure for nearly two years. Exports of services leapt by 14.1%.

Much of Hong Kong's trade involves handling imports and exports heading to and from China, and a rapid increase in this market helped the export figures.

But observers have warned that this trade is vulnerable because much of it is with the US, which has been experiencing its own economic difficulties.

The GDP figures were also helped by a big increase in tourism, with a surge in visitor numbers from mainland China.