Visitors enjoy the view of Victoria Habour at the Avenue of Stars in Tsim Sha Tsui, Hong Kong on January 2, 2023. (CHINADAILYHK.COM)
Economists are generally optimistic that Hong Kong will see modest economic growth this year, as the city is set to resume quarantine-free travel with the Chinese mainland on Sunday.
The Hong Kong economy will expand 2.5 percent for the full year of 2023, buoyed by an improving domestic labor market due to the resumption of normal travel with the mainland, according to a forecast by the Hong Kong Institute of Economics and Business Strategy of the University of Hong Kong on Thursday.
Buoyed by the further loosening of COVID curbs, Hong Kong’s private business sector sentiment has improved despite weak demand and persistent cost pressures faced by private sector firms
The institute expects the city to register a gross domestic product decline of 2.6 percent in the fourth quarter of last year, compared with the 4.5 percent slump in the previous quarter, due to the gradual relaxation of social distancing measures and travel restrictions.
But in the first quarter this year, the economy is expected to expand by only 1 percent as many advanced economies have launched monetary tightening policies to combat inflation, which led to interest rate hikes, the institute added.
Buoyed by the further loosening of COVID curbs, Hong Kong’s private business sector sentiment has improved despite weak demand and persistent cost pressures faced by private sector firms.
The S&P Global Hong Kong SAR Purchasing Manager’s Index, released on Thursday, posted 49.6 in December 2022, up from 48.7 the previous month, which was still below the 50 neutral threshold for a fourth consecutive month.
“The external environment remains challenging for Hong Kong private sector firms with foreign demand having declined at amongst the fastest pace seen in 2022. Orders from the Chinese mainland likewise remained subdued, affected by COVID disruptions even as restrictions were eased,” cautioned Pan Jingyi, economics associate director at S&P Market Intelligence. “It will be important to see demand pick up to bring about more positive changes to the Hong Kong economy.”
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S&P Global Market Intelligence forecast that Hong Kong’s GDP will expand 2.8 percent this year following a 3 percent contraction in 2022.
Hang Seng Bank expects the Hong Kong economy to expand 2.5 percent this year, and may revise its forecast upwards depending on the outcome of quarantine-free travel.
Lawrence Wan, head and senior director of retail advisory and transaction services at CBRE Hong Kong, said “the border reopening will give a limited short-term boost to the retail sector, but it can help the sector in the long run and have a positive impact on Hong Kong's economy.”
Quotas have been set for the initial stage of quarantine-free crossing, Wan pointed out, therefore it can be expected that people traveling to Hong Kong will come mainly for family visits and business travel. The tourist volume will remain low. “It will take several years for Hong Kong to gradually regain its momentum and bring the number of tourist arrivals back to the level of 2018-2019 before the pandemic.”
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The government of Hong Kong Special Administrative Region in November last year trimmed the GDP forecast for 2022 to minus 3.2 percent, citing a widened year-on-year contraction in the third quarter of last year.