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The weakening global demand and the spillover of China’s zero-Covid rules have hit the economic growth of Hong Kong. During the last quarter of 2022, Hong Kong GDP contracted by 4.2%, the fourth consecutive quarter of decline and worse than what economists were expecting.
The final quarter of 2022 was also the second worst on record since Q2 of 2020 when Hong Kong shrank by 9.4%. However, the contraction was lesser than the Q3 of 2022 when the economy declined by 4.6%.
What hurt Hong Kong GDP?
For the full year 2022, Hong Kong GDP declined by 3.5%, more than the 3% contraction expected by the authorities and economists.
Morgan Stanley, Hang Seng Bank, Natixis and DBS were expecting Hong Kong GDP to contract between 2.8% and 3.1% in the final quarter of 2022. One of the main contributors to this decline was weak trade, along with weakening domestic demand.
The city’s exports fell 28.9% in December, the biggest monthly drop in seven decades, as disruptions in cross-border transport hit trade. In November, exports fell 24.1% compared to the previous year. Hong Kong saw a trade deficit of HK$51.6 bn in December, while imports were down by 23.5% compared to the previous year. For the full year, the city saw exports decline of 8.6%, while imports were down 7.2%.
However, the Hong Kong GDP is likely to post a recovery in 2023, says the government. “While softer growth of the advanced economies will continue to pose challenges to Hong Kong’s exports of goods, an expected faster growth of the Mainland economy and the relaxation of cross-boundary truck movement restrictions should provide some support,” said the government.
Hong Kong’s inflation rate for the month of December was approximately 2% compared to the previous year, and the monetary tightening by economies around the globe is likely to have a greater impact on the economy.
