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

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.

www.sba.tax

Comments

Cloud Bookkeeping

US FED rate rise.

The US Federal Reserve officials have indicated that they plan to resume increasing interest rates to control inflation in the world's biggest economy. During the June meeting, the Federal Open Market Committee reached a consensus to keep interest rates stable for the time being to evaluate whether further tightening of policy would be necessary. However, the majority of the committee anticipates that additional rate increases will be required in the future. The minutes of the meeting have recently been made public. According to the minutes, most participants believed maintaining the federal funds rate at 5 to 5.25 per cent was appropriate or acceptable, despite some individuals wanting to raise the acceleration due to slow progress in cooling inflation. Although Fed forecasts predicted a mild recession starting later in the year, policymakers faced challenges in interpreting data that showed a tight job market and only slight improvements in inflation. Additionally, officials gr...

EU business slide.

S&P Global’s flash eurozone composite purchasing managers’ index, a key gauge of business conditions for the manufacturing and services sector, fell 1 point to 47.1, figures showed yesterday. That is its lowest level since November 2020 and the fourth consecutive month below the crucial 50 mark separating growth from contraction. One of the few bright spots in the survey was that companies in all sectors reported a slight easing of cost pressures, price growth and supply chain constraints. However, prices charged for goods and services still rose at the sixth fastest rate since such data started in 2002. Jobs growth increased marginally from October but remained low compared with the past 18 months. Following a few months of falling price pressure in manufacturing and services, the October print shows an overall stabilisation said Jens Eisenschmidt, chief European economist at Morgan Stanley. However, German businesses, at the hub of Europe’s energy crisis, reported that manu...

Tariffs on UK electric cars.

The European Commission has confirmed that it will continue with its plan to impose tariffs on electric cars exported between the UK and EU starting next year. This is due to the "rules of origin" requirement that mandates EVs traded across the English Channel to have 60% of their battery and 45% of their parts sourced from the EU or UK or face a 10% tariff. A senior Commission official, Richard Szostak, recently informed parliamentarians from the UK and EU that the bloc's battery investment has significantly declined, making the tariffs necessary to encourage domestic production. In 2022, the EU's share of global investment in battery production shrank from 41% to only 2% after the US offered substantial subsidies through its Inflation Reduction Act. Starting in 2024, car manufacturers in the UK will need to have 22% of their sales come from zero-emission vehicles, which means they may need to import EVs from the continent to meet this requirement. If EU carmakers ...

Search This Blog