Hong Kong growth forecasts slashed as global risks intensify

Published Tue, Nov 1, 2022 · 11:05 AM

ECONOMISTS slashed their forecasts for Hong Kong’s full-year growth this year after the financial hub recorded its worst quarter since 2020, with surging global interest rates and the slump in trade leaving little hope it can avoid contraction in 2022.

Goldman Sachs Group late Monday (Oct 31) said it expects Hong Kong’s 2022 gross domestic product (GDP) to shrink 3.2 per cent from an expected 1.4 per cent decline previously, citing the weaker-than-expected slowdown in the third quarter.

Citigroup economists on Tuesday cut their full-year growth forecast to a 2.6 per cent fall from a 0.3 per cent expansion previously, also citing the deteriorating economic picture. United Overseas Bank downgraded its forecast for 2022 to a 3 per cent contraction from a 0.7 per cent decline, adding that there is “a lack of catalysts for stronger recovery”.

The city on Monday recorded a 4.5 per cent plunge in GDP for the July-to-September period from a year earlier, far below the median estimate of a 0.8 per cent slump in a Bloomberg survey. Government officials blamed the fall on cargo disruptions along the border with China, which is tightening Covid restrictions to combat outbreaks there. The data also showed a sharp contraction in investment, largely due to rising interest rates as Hong Kong follows the US Federal Reserve in its aggressive policy tightening. Economists also cited property sector turmoil, flat consumption and a collapse in trade as factors.

The Citi economists wrote that as the domestic recovery is “still not in sight”, capital outflows, a quickening drop in property prices and pessimism over China’s growth and border reopening prospects will likely make the next couple of quarters difficult - “even as local Covid restrictions ease further”.

Goldman and Citi also trimmed their forecasts for 2023, projecting a smaller rebound than previously expected.

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Bloomberg Economics said Monday it sees GDP shrinking 3.4 per cent in 2022, a deeper drop than earlier anticipated as slowing global demand, rising interest rates and China’s Covid Zero restrictions outweigh any efforts locally to lift the city’s remaining Covid curbs. The government in September eliminated hotel quarantine for arrivals, though some movement curbs still remain.

The government in August revised its own full-year GDP forecast to contract or expand in the range of -0.5 per cent to 0.5 per cent in 2022, down from a previous prediction of 1 per cent to 2 per cent. Should the economy contract it would be the third time since 2019. BLOOMBERG

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