In the third quarter ending September 2022, Hong Kong’s economy contracted 4.5% less than it had in the previous year, marking the third consecutive quarter of contraction on continued weak foreign demand, according to preliminary figures released by the government on October 31, 2022.
The city’s GDP contracted 4.0% in the first quarter that ended March 2022 and 1.3% in the second quarter that ended June 2022. The contraction in June 2022 was the most severe since the second quarter of 2020 when the global effects of COVID-19 caused the GDP to fall 9.4%. The annual real GDP growth in Hong Kong in 2022 was low at 0.3% in comparison to 6.4% in 2021, according to GlobalData.
The deteriorating external environment will continue to exert pressure on Hong Kong’s export performance over the coming months. Although the quarantine restrictions on tourists have been relaxed, outbreaks of the pandemic and geopolitical upheaval compounded the problems. A consumer voucher program and the improved labor market will be helpful, but tighter financial conditions and declining asset prices will outflank them.
Meanwhile, fixed asset investment will be discouraged by higher borrowing costs. Hong Kong’s short-term outlook will continue to be challenging due to the faltering economy of China, the weakening global trade environment, and poor domestic household morale. Since the start of 2020, COVID-19-related restrictions strained the city’s economy, bringing pleasure and business travel to a halt, besides affecting pubs, restaurants, and retail stores.
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