Hong Kong’s financial system seen contracting in 2022 as GDP slumps

Hong Kong’s financial system seen contracting in 2022 as GDP slumps

(Aug 2): Economists downgraded their forecasts for Hong Kong’s financial system, predicting it might contract for the third time in 4 years, after knowledge Monday confirmed progress is being weighed down by Covid restrictions and a hunch in commerce.
Goldman Sachs Group Inc. expects gross home product to say no 0.5% in 2022, down from an earlier prediction of 0.3% progress. Bloomberg Economics now sees GDP shrinking 0.6% in contrast with a earlier projection of 0.7% growth. The downgrades comply with Monday’s worse-than-expected knowledge displaying the financial system contracted 1.4% within the second quarter from a 12 months earlier.
Whereas some aid is predicted for Hong Kong within the second half, the restoration is unsure given the drag on demand and commerce from Covid restrictions regionally and in mainland China. Progress momentum can also be coming underneath stress as Hong Kong raises rates of interest in step with the hawkish Federal Reserve to take care of the native greenback’s peg to the US greenback.
Separate knowledge launched Tuesday confirmed client spending remained underneath stress. The worth of retail gross sales fell 1.2% in June from a 12 months in the past, weaker than economists anticipated. Sale volumes dropped 4.1%, led by falls in purchases of clothes and electronics, authorities knowledge confirmed.
Hong Kong’s weaker-than-expected 2Q GDP outcomes spotlight the challenges nonetheless going through the financial system: A faster restoration requires additional reopening, however rising Covid instances have sophisticated that. Slowing exterior demand and better rates of interest aren’t serving to both. Given the weak spot of the 2Q numbers, we now see GDP shrinking 0.6% in 2022 — worse than the 0.7% growth we forecast earlier.
The financial system shrank in 2019 when the town was engulfed by political protests, and in 2020 amid the outbreak of the pandemic.
Monetary Secretary Paul Chan stated on Sunday that the town would “inevitably revise down” its full-year progress forecast of 1%-2% in the midst of the month. A metropolis spokesperson stated on Monday that the restoration had been held again by components together with disruptions to cargo between Hong Kong and mainland China, a resurgence in Covid-19 instances, tightening financial coverage, and inflation in superior economies.
Citigroup Inc. economists lowered their full-year progress forecasts for Hong Kong by a full share level, predicting growth of simply 0.5%. Home demand is predicted to be curbed within the second half by rising Covid instances and continued uncertainties across the timing of Hong Kong’s border reopening with mainland China and fears of world recession, they wrote in a observe.
DBS Group Holdings Ltd. analysts additionally downgraded their 2022 GDP estimates for the town to 1% from 1.7%. There are expectations that obligatory quarantine for worldwide arrivals could also be relaxed later within the 12 months, and a few resumption of large-scale occasions together with a monetary convention in November, which is able to drive a modest restoration in consumption, they wrote in a observe.
Hong Kong is without doubt one of the final locations on the earth that has caught to social distancing measures for Covid and quarantine restrictions for inbound vacationers, which has held again tourism and journey to the town. Whereas some restrictions within the metropolis have been eased from April, retail gross sales and exports have been sluggish to bounce again.

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