Hong Kong’s gross domestic product (GDP) is expected to shrink by 2.5 per cent in 2022, following a 6.3 per cent expansion last year, according to AMRO’s (ASEAN+3 Macroeconomic Research Office) 2022 Annual Consultation Report. The region’s economic growth in 2023 will increase by 4.3 per cent in 2023, mainly by the current gradual relaxation of quarantine requirements.

After the heavy blow of the fifth wave of COVID-19 in the first quarter (Q1) of 2022, domestic demand gradually recovered in Q2 as infections subsided and social-distancing measures were gradually relaxed, according to the report.

Headline inflation is set to increase moderately to 2 per cent in 2022 and 2.3 per cent in 2023, reflecting the economic recovery and a pass-through of imported inflation.

Financial conditions have tightened as Hong Kong dollar interest rates have risen in tandem with US interest rates. Despite the triggering of the weak-side convertibility undertaking, the Linked Exchange Rate System (LERS) remains robust, supported by ample foreign and fiscal reserves and the automatic interest rate adjustment mechanism.

The growth outlook is subject to significant uncertainties, and downside risks are more pronounced. In the near term, the spread of new and more virulent variants of COVID-19 remains a major threat to Hong Kong’s economic recovery. It could lead to weaker domestic and external demand.

As Hong Kong’s economy is still in the nascent stage of recovery and the near-term downside risks are elevated, firm policy support for businesses and households should continue. Government support could prioritise the most vulnerable sectors and households to promote a more balanced recovery, the report further suggested.

Fibre2Fashion News Desk (DP)

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