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Hong Kong's economy shrunk by 3.5 %

The city’s eco­nomy has shrunk by 3.5 per cent in a blow to its bid to keep its status as Asia’s fin­an­cial

Hong Kng
hub. However, eco­nom­ists are fore­cast­ing a rebound this year. The city, which was effect­ively cut off from main­land China and the rest of the world under travel restric­tions that las­ted nearly three years, only dropped most of its Covid-19 curbs and resumed quar­ant­ine-free travel late last year. A gov­ern­ment spokes­per­son blamed the fig­ures on a plunge in exports and weakened domestic demand under the pan­demic curbs.

Total exports fell 8.6 per cent last year from 2021 to HK$4.5tn. «An expec­ted strong rebound of inbound tour­ism fol­low­ing the removal of quar­ant­ine arrange­ments for vis­it­ors and resump­tion of nor­mal travel between Hong Kong and the main­land should under­pin a recov­ery,» the spokes­per­son said. Hong Kong also faced fin­an­cial pres­sure after prop­erty prices declined about 15 per cent last year. As home prices slid and interest rates rose, the num­ber of neg­at­ive equity mort­gages in the city hit an 18-year high, jump­ing to 12,164 by the end of Decem­ber from 533 in Septem­ber.

Moody’s Ana­lyt­ics fore­cast Hong Kong’s 2023 GDP growth at 4 per cent, which would sur­pass Singa­pore’s 2.1 per cent. The city-state, which reopened to the world months earlier, recor­ded an increase of 3.8 per cent for 2022. However, Heron Lim, a Moody’s Ana­lyt­ics eco­nom­ist, said the «eco­nomic dam­age for Hong Kong would take time to heal». «We cur­rently project that Hong Kong will only exceed pre-pan­demic out­put peaks in 2024,» he said.

Natixis senior eco­nom­ist Gary Ng said Hong Kong could gain up to $22bn in annual tour­ism rev­enue, equi­val­ent to 5.9 per cent of its eco­nomy if travel were nor­m­al­ised with main­land China. Hong Kong had 443,000 vis­it­ors in the first 11 months of 2022, less than 1 per cent of the same period in 2019. China’s eco­nomy expan­ded by 3 per cent last year, but the IMF this week raised its 2023 growth fore­cast to 5.2 per cent as the eco­nomy reopened.

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