Key points:
- Hong Kong GDP contracts 4.2% yr/yr in the fourth quarter.
- Q4 seasonally adjusted GDP remains nearly unchanged q/q
- The Economy is to recover this year on a rebound in spending, and tourism.
According to Reuters, Hong Kong’s economy shrank for the fourth straight quarter, a drop of 4.2% recorded. Credits to advance government data showed on Wednesday, It is almost disheartening for economists with expectations. Economists have assumed that weakened growth would be observed but it has sunk more than expected. The global demand and higher interest rates hit exports and spending.
After 2020, it is the second biggest contraction when gross domestic product shrank 9.4% as the COVID-19 pandemic put a major impact worldwide. Hang Seng and Natixis expected GDP to decline between 2.8% and 3.1%. The city’s economy dwindled at a revised 4.6% in the third quarter.
“Looking ahead, Hong Kong economy is expected to show recovery in 2023,” the government said that China’s growth recovery and rebound in tourism from the opening gates should lend support.
On a quarterly basis, the economy remained virtually unchanged in the October-December period as compared with a 2.6% decrease in Q3. In 2022, the GDP dropped by 3.5%.
China and Hong Kong are now planning to come back even stronger, but they have only one source of revenue i.e tourism, that too, because of China’s zero-COVID policies. In a large aspect, we can observe that China and its cities are negatively impacted by the COVID-19 pandemic. However, it becomes essential to work on consumer spending as a priority.
On the contrary, Hong Kong SAR is pressurized because of high inflationary attributes and aggressive monetary tightening in advanced economies. Higher borrowing costs and a pessimistic economic outlook have hit asset prices, lugging 2022 private home prices down 15.6% in the first annual drop since 2008.
Barclays, HSBC, Hang Seng Bank, and DBS forecast Hong Kong’s GDP to grow by 2.1% and 6.5% in 2023.
The government replied with a positive attitude stating that private consumption will boost by focusing on an improved economic outlook, with return of business activities, and a strong labor market in 2023.
“The real impact of the still partially reopened border with mainland China will only be felt from the second quarter, meaning the pressure will prevail in the short run,” said Gary Ng, senior economist at Natixis Corporate and Investment Bank.
China’s harsh attempt on the world impacts its cities badly. For example, strict COVID-19 restrictions have affected Hong Kong’s economy since early 2020, grinding tourism to a halt and battering sales at bars, restaurants, and shops.
Hong Kong’s top leader John Lee has prioritized improving international competitiveness and attracting more overseas talent, other restrictions have been lifted, apart from including the wearing of masks.
Last week, Lee said he aims to lift all COVID-19 restrictions within this year and lead the global financial hub toward a full return to normality. “Even though there are cyclical upsides from China, Hong Kong will likely grow by 3% in 2023 and only touch its pre-pandemic level by year-end due to the negative impact of high-interest rates on exports and consumer sentiment,” Ng said. “The city is still lagging regional competitors.”
- Published By Team Hongkong Journalist
