After a near-certain contraction last year for the third time since 2019, Hong Kong’s economy is coming back stronger this year and might even grow faster than rival financial hub Singapore for the first time in more than a decade.
Economists are upgrading their forecasts for Hong Kong this year as the city accelerates its reopening with China and the rest of the world.
The median estimate in a Bloomberg survey of 12 economists last week was 3.3 percent growth for this year, higher than the 2.7 percent forecast in a survey of 25 economists in November last year.
Photo: AP
Analysts are becoming more optimistic as Hong Kong sheds its remaining COVID-19 curbs and rolls out a plan to allow people to more freely cross the border to China again.
China on Sunday ended quarantine for arrivals, making cross-border travel a reality again for many people.
An influx of arrivals would be good news for the territory, and could revive businesses that have been hurt by the closure, from hotel and catering companies to investment and wealth management firms.
“We see Hong Kong turning the corner, but the real effects are likely to be seen only in the second half of 2023,” Moody’s Analytics economist Heron Lim (林師順) said.
He expected Hong Kong’s GDP to expand 3.8 percent this year, compared with a November estimate of 3.2 percent.
Lim said quarterly growth could reach 7.7 percent in the October-to-December period.
Hong Kong officials have said they think GDP shrank 3.2 percent last year.
Growth in trade-reliant Singapore is projected to level off this year as the US and Europe head for likely recessions, with the most recent estimate in a Bloomberg survey showing the city-state would expand 2 percent after expanding 3.8 percent last year.
If Hong Kong grows at a faster pace, it would surpass Singapore for the first time since 2008.
Economists who participated in the most recent Hong Kong survey expect the city to turn to fiscal support and other measures to shore up growth this year.
Three respondents said they thought officials would issue more consumption vouchers worth HKD$5,000 (US$640) per person to spur spending, while seven people said either personal or corporate tax cuts could be on the table.
Respondents were allowed to select more than one option.
Even as Hong Kong reopens — to China and the rest of the world — its problems could be hard to fix. The years of isolation cost Hong Kong’s economy an estimated US$27 billion in potential growth, analysis by Natixis SA said.
The city’s property market — the world’s least affordable — is also under strain as interest rates rise and housing demand slides, while global headwinds including weak demand and an impending worldwide recession are adding to the territory’s woes.
“China’s reopening is helpful, but it will not solve all problems Hong Kong has right now,” Natixis senior economist Gary Ng (吳卓殷) said.
He projected growth of 3 percent for this year, slightly below the median estimate.
“As higher interest rates and global slowdown kick in this year, the city’s economic prospect is only cautiously optimistic with short-term pressure,” he said.
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