The fifth wave of the epidemic has hit all walks of life. Exports are particularly bleak. In addition, customs clearance is even more difficult. It is expected that there will be no big rebound this year. While Hong Kong’s economy is deteriorating, the labour market is under pressure and the unemployment rate is high. The government released the Economic Report for the first quarter of 2022 and revised GDP figures for the first quarter of 2022 yesterday. In view of the weaker-than-expected performance in the first quarter and taking into account the deterioration of export prospects, the real GDP growth forecast for this year has been revised down to 1% to 2% from the 2% to 3.5% announced in the Budget. A broken shop. The economy maintained its previous estimate of a 4% contraction in the first quarter. The forecasts for underlying consumer price inflation and overall consumer price inflation remain unchanged at 2% and 2.1%, and the unemployed are even more worried.
Annual economic growth expected to be only 2%
Hong Kong’s economy was good at the beginning of the year. When the government announced its budget in February, it predicted that the economy would still grow by 2% to 3.5% for the whole year. However, the fifth wave of the epidemic has reversed the situation. According to the revised figures released by the government yesterday, the forecast was lowered to 1% to 3.5%. 2%.
Leung Wing-sing, the government’s economic adviser, pointed out that Hong Kong’s economy deteriorated significantly in the first quarter of this year. Externally, the slowdown in global demand growth and the disruption of cross-border transportation caused by the epidemic significantly dragged down export performance. Locally, the fifth wave of the local epidemic and the resulting restrictions have severely hit economic activity and sentiment. Real GDP contracted by 4.0% year-on-year, reversing the growth trend of the previous four quarters. On a seasonally adjusted quarter-to-quarter comparison, real GDP fell by 3.0%.
Private consumption expenditure fell 5.5% year-on-year
He said overall exports of goods deteriorated sharply in the first quarter, falling 4.5% year-on-year in real terms. Domestic demand has weakened significantly, market traffic has dropped sharply, and labor market conditions have deteriorated, and private consumption expenditure has turned to a year-on-year decline of 5.5% in real terms. Business sentiment deteriorated, with the year-on-year decline in overall investment expenditure widening to 8.4% in real terms.
In addition, he noted that the labor market was severely under pressure. The seasonally adjusted unemployment rate rose significantly from 4.0% in the fourth quarter of 2021 to 5.0% in the first quarter of this year, reversing the downward trend since the beginning of 2021. Unemployment rates rose in most major industries, especially those related to consumption and tourism, arts, entertainment and recreational activities, and construction. The underemployment rate also rose significantly from 1.7% to 3.1%. The local stock market was volatile in the first quarter, amid concerns about the imminent tightening of U.S. monetary policy, the situation in Ukraine, regulatory requirements in the mainland and the severe local epidemic. The residential property market remained soft, with thin transactions and further declines in residential prices.
The underlying Composite CPI rose by 1.6% year-on-year in the first quarter, higher than the 1.2% increase in the previous quarter. The price of basic food has risen significantly under the epidemic. Looking ahead, he believes that under the influence of escalating geopolitical situations and supply chain bottlenecks, inflation remains high in many major economies, which may keep external price pressures high. However, overall inflation should remain subdued in the near term as local cost pressures remain broadly mild.
It is difficult to catch up in the peak season
However, some scholars believe that the government’s estimate of annual growth is too optimistic, mentioning that the effect of consumer coupons has almost been demonstrated in April and May. In the past, the summer vacation was the peak season, and hundreds of thousands of students were on vacation, but now there is no peak season, and hundreds of thousands of students are not on summer vacation, so internal consumption is actually not too optimistic. This year, it will be difficult to “catch up”.
The accounting firm KPMG China pointed out that the fifth wave of the epidemic has had a significant impact on Hong Kong’s economy, and it has fallen into a state of contraction again. The short-term job market in Hong Kong is still facing certain pressure, but as the epidemic cools down and epidemic prevention measures are gradually loosened, and the Hong Kong government has distributed new A round of electronic consumer vouchers and the reintroduction of the employment guarantee plan are believed to help Hong Kong’s economy gradually stabilize. In addition, geopolitical conflicts will lead to a significant slowdown in global economic growth this year, and external demand will further decline. Hong Kong’s exports will continue to be under pressure. However, the local epidemic situation in Hong Kong has stabilized recently, and the problem of poor cross-border transportation will be alleviated, which can provide certain support for Hong Kong’s exports.
KPMG China also pointed out that against the backdrop of uncertainties for Chinese companies to list in the U.S., Hong Kong continues to be the first choice for return listings. In terms of investment sectors, industrial markets, information technology, media and telecommunications, and healthcare and life sciences were the top three industries in terms of total fundraising in the first quarter, accounting for 91% of total fundraising. Up to now, more than 150 companies are applying for listing on the Hong Kong Stock Exchange, and it is expected that the Hong Kong capital market will recover in the second half of the year.
