Hong Kong GDP falls more than expected as COVID curbs bite | Business and economy
The economy is contracting 4% in the January-March period from a year earlier, according to advance estimates.
Hong Kong’s economy contracted in the last quarter for the first time in more than a year as local restrictions aimed at curbing Covid activity and China’s own omicron outbreak disrupted trade.
Gross domestic product fell 4% in the January-March period from a year earlier, according to preliminary estimates released by the government on Tuesday. The number – the first in Hong Kong since the end of 2020 – was much worse than a median estimate of a 1.3% contraction in a Bloomberg survey. It is also the strongest contraction since the third quarter of 2020.
The city faced “tremendous pressure” in the first quarter of 2022, a government spokesperson said in a Census and Statistics Department statement accompanying the data. The city’s fifth coronavirus wave, along with moderating global demand growth and “outbreak-induced cross-border transportation disruptions,” have all weighed on the economy, the person said.
Ahead of the data, there were signs of deep economic damage in the first three months of the year, with retail sales collapsing more than 14% in February and exports plunging 8.9% in March. The city imposed strict social restrictions during the quarter – including a ban on dining after 6 p.m. and the closure of gyms and beauty salons – to fight a wave of coronavirus that has killed thousands and infected more of a million people.
“This shows how private consumption, retail sales and the pandemic in China have hit growth,” said Samuel Tse, an economist at DBS Group Holdings Ltd in Hong Kong. Tse had forecast a contraction of 1.2% due to a weak comparison base with the first quarter of last year.
The Asian financial hub is slowly starting to reopen, meaning the first-quarter recession could mark the bottom of the growth cycle. The government on Tuesday accelerated reopening plans and will allow eight people to eat together on Thursday, up from four previously, along with other easing measures. Two weeks later, restaurant hours will be extended from 10 p.m. to midnight, chief executive Carrie Lam told a briefing.
However, much will depend on China’s own outbreak and Covid controls, which have made it difficult to transport goods to and from the mainland. Hong Kong’s exports to China fell 12.8% in March from a year ago, official figures show.
China’s trade disruptions and weak external demand could persist at least into next month, Tse said, adding that he expects further contraction in the second quarter.