HONG KONG (BLOOMBERG) – Hong Kong’s economic system contracted for a second consecutive quarter, with the monetary hub dealing with mounting headwinds as rates of interest rise and international commerce weakens.
Gross home product declined 1.4 per cent within the second quarter from a yr earlier, based on advance estimates launched by the federal government on Monday, weaker than economists’ forecasts for a 0.2 pe cent decline.
Monetary Secretary Paul Chan had signaled on Sunday that GDP would shrink within the quarter. He additionally mentioned town will “inevitably revise down” its full-year development forecast of 1-2 per cent in the course of subsequent month.
The town’s economic system has come below pressure as native Covid restrictions curbed enterprise and client exercise, whereas outbreaks on the mainland disrupted commerce. On the similar time, Hong Kong’s central financial institution has been compelled to lift rates of interest to maintain tempo with the hawkish Federal Reserve as a way to preserve the native greenback’s peg to the US greenback.
The town’s restoration within the second quarter of 2022 was “smaller than anticipated,” a authorities spokesperson mentioned in a launch from the Census and Statistics Division accompanying the info.
Momentum was dragged down by continued cargo stream disruptions between Hong Kong and mainland China, in addition to from “the current enhance within the variety of Covid-19 circumstances and tightened monetary circumstances,” the spokesperson mentioned.
Whereas Hong Kong relaxed a few of its social distancing and Covid restrictions from April after its fifth coronavirus wave eased, retail gross sales and exports have been gradual to rebound. The town stays one of many final locations on this planet to keep up strict quarantine restrictions for inbound vacationers, holding again tourism and journey to the monetary hub.
Mr Samuel Tse, an economist at DBS Group Holdings Ltd. in Hong Kong, mentioned the additional decline in GDP was not stunning given current “disappointing” knowledge for retail gross sales and exports. Native development momentum stays “fairly sluggish,” even when prospects might enhance within the second half of the yr, significantly if town step by step reopens its border with the remainder of the world, he mentioned.
“The most important danger is exterior demand and the tempo of fee hikes,” he mentioned.
Monetary Secretary Chan advised reporters at a briefing final week that steady fee hikes are “disadvantageous for financial restoration,” including that the worldwide downturn may weigh on Hong Kong’s export efficiency.
Commerce has been struggling as flows to the mainland proceed to fall. Shipments to the US and European Union flipped to a decline in June.
The federal government mentioned Monday the specter of inflation within the US and Europe, infected by Russia’s invasion of Ukraine earlier this yr, is predicted to “dampen financial development considerably” for the remainder of the yr.
Whereas mainland China’s economic system may even see some reduction, it could not have the ability to offset the deteriorating state of affairs in superior economies, it added.