HONG KONG – Hong Kong’s economy shrank for the fourth straight quarter, contracting an annual 4.2 percent, advance government data showed on Wednesday, worse than economists’ estimates as weakening global demand and higher interest rates hit exports and spending.
It was the second deepest contraction since the second quarter of 2020 when gross domestic product shrank 9.4 percent, as COVID-19 took a toll around the world.
Economists from Morgan Stanley, DBS, Hang Seng Bank and Natixis expected GDP to contract between 2.8 percent, and 3.1 percent. The city’s economy shrank 4.6 percent in the third quarter.
On a seasonally adjusted quarterly basis, the economy remained virtually unchanged in the October-December period as compared with a 2.6-percent, contraction in the third quarter. For the whole of 2022, GDP shrank 3.5 percent,.
The Asian financial hub has been battered by its own pandemic measures and also spillover from China’s zero-COVID policies, but recovering consumer spending on the mainland and a rebound in travel are expected to help the economy this year.
However, Hong Kong is facing risks from high inflationary pressure and aggressive monetary tightening in advanced economies. Higher borrowing costs and a pessimistic economic outlook have hit asset prices, dragging 2022 private home prices down 15.6 percent in the first annual drop since 2008.
Strict COVID-19 restrictions have affected Hong Kong’s economy since early 2020, grinding tourism to a halt and battering sales at bars, restaurants and shops.
Hong Kong’s top leader John Lee has prioritised improving international competitiveness and attracting more overseas talent, and most restrictions have already been lifted apart from the wearing of masks.
Last week, Lee said he aims to lift all COVID-19 restrictions within this year and lead the global financial hub towards a full return to normality.