HONG KONG – Hong Kong’s economy contracted 1.3% in the second quarter from the same period a year earlier, government data showed on Friday, following a weak performance in external trade during the period.
It was the second straight quarter of year-on-year contraction for the Asian financial hub’s gross domestic product (GDP).
Seasonally adjusted GDP was 1% higher in the second quarter than three months earlier, however.
Rising inflation, cooling global demand and weak consumer sentiment in the trade-reliant city remain significant risks for the recovery, analysts say.
The second quarter’s annual growth pace compared with a decline of 3.9% in the previous quarter. The advance estimate for the second quarter had been a 1.4% contraction.
COVID-19 restrictions have weighed on the city’s economy since early 2020, grinding tourism and business trips to a halt and battering bars, restaurants and shops repeatedly for prolonged periods.
The curbs are partly blamed for a net outflow of 113,200 people from Hong Kong between mid-2021 and mid-2022, according to government estimates.
The city of 7.3 million has shortened the mandatory hotel quarantine period for all arrivals to three days from seven, but, as much of the world is now co-existing with the virus, the restrictions are expected to keep the city isolated.
“The “3+4″ scheme may be helpful for trips by Hong Kong residents, but there will not be any meaningful impact in attracting tourists and business travellers until it matches the policies of the competitors, such as Singapore,” said Gary Ng, senior economist at Natixis Corporate and Investment Bank.
The outlook for the global financial hub was overshadowed by increasing inflation rates globally and an uncertain geopolitical situation, although the prospects of a revival in the mainland economy should offset risks, the government said.
“The markedly deteriorating external environment will weigh heavily on Hong Kong’s export performance in the remainder of the year,” a government spokesperson said in a statement.
“Elevated inflation in the advanced economies and the aggressive tightening of monetary policy by many major central banks in response will further weaken the global growth momentum, though the expected revival of the mainland economy should provide some offset.”
The government revised down its full-year growth forecast to between 0.5 and minus 0.5% from between 1% and 2%, citing a deteriorating global growth outlook, while the underlying inflation estimate for 2022 remained at 2%.
“The (latest quarantine) policy is encouraging for aviation and outbound tourism, but not so much for the overall economy,” Ng added.
(Reporting by Twinnie Siu and Donny Kwok; Editing by Anne Marie Roantree and Bradley Perrett)