Hong Kong Ends Record Slump With Fastest Growth in a Decade
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Hong Kong’s economy finally turned the corner, posting its fastest growth since 2010 as the city makes a stronger recovery from the pandemic and social unrest before that.
After declining for a record six quarters, gross domestic product surged 7.8% in the first quarter from a year earlier, advance data showed Monday, beating all estimates in a Bloomberg survey of economists. While that’s partly distorted by the low base a year ago when the economy was in lockdown, the quarter-on-quarter expansion, a better reflection of growth momentum, also outperformed, reaching 5.3%, well above an estimate of 0.7%.
“The strong first-quarter outturn does signal that the economy will recover faster than previously expected,” said Tommy Wu, lead economist with Oxford Economics in Hong Kong. A strong recovery in global trade and a robust pipeline for company listings will support the city’s economy and financial sector, while restrictions on travel and tourism will gradually ease, he said.
Hong Kong has endured its most economically challenging two-year stretch in its history, posting unprecedented back-to-back annual contractions in 2019 and 2020 as the city grappled with waves of political unrest, fallout from the deteriorating U.S.-China relationship, and the Covid-19 pandemic.
The latest data show an uneven recovery, with a booming export sector but still weak domestic spending. Activity remains below pre-recession levels as the pandemic and social distancing measures continue to weigh on the economy, especially on consumer spending and tourism, the government said in its report Monday. Business and consumer confidence is expected to see broad improvement later this year, assuming the virus remains under control.
“Looking ahead, the global economic recovery led by the mainland and the U.S. should bode well for Hong Kong’s exports of goods in the near term,” according to the report. “Exports of services should likewise improve, though the revival of tourism-related activities will likely be slow in view of the still austere pandemic situation in many places around the world.”
The government will announce revised figures for the first quarter as well as its latest projections for full-year growth on May 14. Financial Secretary Paul Chan has previously estimated the economy will expand 3.5% to 5.5% in 2021.
The economy has recently showed signs of stronger recovery. Exports surged above HK$400 billion ($51.5 billion) for the first time ever in March while unemployment dropped the most since 2003 in the month, easing back from a 17-year high. Retail sales by value jumped 30% in February, the first increase in that measure since January 2019.
However, the city continues to grapple with a persistently low vaccination rate from a distrustful populace, potentially hindering Hong Kong’s efforts to fully rebound from the pandemic.
“Gradual relaxation of social distancing bodes well for domestic activities,” said Raymond Yeung, chief economist for Greater China at Australia and New Zealand Banking Group Ltd. “What’s concerning is the relatively slow vaccination rate and the variant of virus strain. The government will maintain a tough stance in virus control measure.”
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