Hong Kong Q1 GDP shrinks more than expected on COVID curbs
By Donny Kwok and Twinnie Siu
HONG KONG (Reuters) – Hong Kong’s financial system contracted within the first quarter of this yr as the town imposed its most stringent restrictions to curb an outbreak of COVID-19 that has battered enterprise, led to an exodus of individuals and overshadowed the outlook for development.
The monetary centre’s financial system shrank 4% within the first quarter from a yr earlier, breaking 4 quarters of development, amid weak efficiency in each home and exterior demand, the federal government mentioned. That compares with revised development of 4.7% within the fourth quarter and forecasts for a 1.2% decline by DBS and 1.3% drop by Normal Chartered for the primary quarter.
“The worldwide financial system will proceed to face important challenges within the close to time period,” a authorities spokesman mentioned in a press release, including that bettering the native epidemic state of affairs and authorities help measures ought to assist carry home demand for the rest of the yr.
Hong Kong’s borders have basically been closed since early 2020, with few flights touchdown and resort quarantine for arrivals damping demand, as the town follows mainland China in implementing a “dynamic zero” coronavirus technique that goals to curb all outbreaks.
“Timing of re-opening of border will hinge crucially on the COVID state of affairs in each China and Hong Kong,” mentioned Samuel Tse, an economist at DBS Financial institution. “Our most optimistic assumption is that it’s going to step by step reopen round finish 3Q-mid 4Q.”
On a quarterly foundation, the financial system shrank by a seasonally adjusted 2.9% in January-March.
Hong Kong’s financial system is predicted to develop 2.0% to three.5% this yr after increasing 6.4% in 2021, with underlying inflation at 2%.
Hong Kong allowed non-residents to enter the monetary hub from Might for the primary time in additional than two years because the variety of each day COVID-19 infections fell, a small step in unwinding stringent restrictions which have turned the town into one of many world’s most remoted locations.
(Modifying by Jacqueline Wong)
