Hong Kong lost some economic momentum in last year’s final quarter, preliminary data showed on Friday, and an unrelenting battle to stamp out Covid-19 infections threatens to slow it further.
The Chinese territory’s gross domestic product (GDP) grew 4.8% in the fourth quarter from the same period a year earlier, thanks to robust exports and improved private consumption partly due to subsidies to consumers worth HK$30 billion ($3.85 billion).
At the start of this year, however, the re-emergence of local coronavirus transmissions prompted the global financial hub to re-imposed tight restrictions and isolate itself from the world.
Hong Kong’s economy grew 6.4% in 2021, marking its first annual rise after two years of recession. GDP contracted 6.1% in 2020, the city’s worst annual performance since 1962.
Looking ahead, the city is struggling to maintain its zero-Covid policy amid an Omicron variant outbreak. Renewed restrictions on restaurants and other businesses have dampened the near-term outlook of the economy.
She noted that seasonally adjusted growth between the third and fourth quarters was only 0.2% and cut her 2022 annual growth forecast to 3% from 4%.
“The near-term outlook has darkened as it is taking longer than had been hoped to bring the fifth wave of infections, largely driven by the Omicron variant, under control,” Sheana Yue, China economist for Capital Economics, said.
She expected Hong Kong’s economy would contract in the January-March quarter
“Stricter social distancing measure domestically will deal another blow to the already fragile recovery in most customer-facing sectors during the peak lunar new year festival.”
Drag on Recovery
Oxford Economics is even more pessimistic, projecting that 2022 growth will reach just 2.3%. “We expect the government’s zero-Covid policy will remain a drag on economic recovery,” said senior economist Lloyd Chan.
The trade-dependent city saw exports rise 26% last year while imports grew 24.3%. Trade with mainland China, the US and EU all expanded, according to the government.
“Our estimates suggest that goods exports rebounded strongly thanks to strong global demand for consumer goods amid renewed virus waves in advanced economies and fewer supply disruptions in Southeast Asia,” Yue added.
“But the pace of growth in private consumption moderated, government spending stagnated, and the downturn in investment deepened.”
- George Russell, with Reuters