Hong Kong Budget: ‘Not optimistic’ – Economic rebound surpassed global growth last year, but will worsen under Covid

The outlook for Hong Kong’s economy in the first quarter of 2022 does not appear to be optimistic as consumption-related sectors come under “intense pressure” during the fifth Covid-19 wave, the city’s finance chief has said. It is despite a rebound in line with the global economy last year, he announced during his 2022 budget speech on Wednesday.

Benefitting from pickup in global trade following two years of the pandemic, Hong Kong’s overall exports saw a strong 19 per cent growth last year. Outperforming global economic growth of 5.9 percent, Hong Kong’s economy grew by 6.4 per cent, making a “visible recovery” after two consecutive years of decline, Financial Secretary Paul Chan said.

Rebound in unemployment

However, the rebound is expected to be undercut as the city grapples with a new wave of Omicron coronavirus cases and subsequent restrictions, Chan said.

Although unemployment dropped from its peak early last year from 7.2 per cent to 3.9 per cent in latest provisional figures, Hong Kong’s economic outlook “is not optimistic” for the first quarter of 2022. Deteriorating unemployment and underemployment may be expected, the minister said.

“Inevitably, economic activities, particularly the consumption-related sectors, will continue to be under intense pressure in the short term,” he said, with growth slowing down to 2 to 3.5 per cent in the second half of the year.

In the future, the forecast for economic growth would average around 3 per cent between 2023 and 2026, with an inflation rate of approximately 2.5 per cent inflation, he said, surpassing pre-pandemic forecasts.

HKFP’s coverage in full:

• HK$10,000 consumption vouchers for all.
• Gov’t pledges over HK$54b to fight Covid-19 ‘on all fronts and at full speed’.
• One-off tax cuts, property rate concessions, electricity subsidies for residents.
• Economic rebound surpassed global growth last year, but will worsen under Covid.
• HK100 billion earmarked for Northern Metropolis plan.
• Landlords will be barred from terminating the tenancies of some small firms.
• Police vehicle and gear budget to quadruple to HK$508 million.
• Prisons to spend over HK$677,000 per detainee next year with 10% budget boost.

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