HK economy shrinks 4 percent in first quarter

Hong Kong’s economy reversed from four consecutive quarters of expansion to shrink four percent year-on-year in the January-to-March period, as the city was hammered by its worst Covid-19 outbreak and global demand moderated.

The preliminary GDP figure, released on Tuesday, followed 4.7 percent growth in the fourth quarter.

Private consumption was down 5.4 percent year-on-year while exports of goods fell 4.5 percent.

Moderating global demand growth and epidemic-induced cross boundary transportation disruptions posed substantial drags to exports, said a government spokesman.

“Domestically, a wide range of economic activities as well as economic sentiment were hard hit by the fifth wave of local epidemic and resultant anti-epidemic measures.”

On a quarter-to-quarter basis, the economy shrank a seasonally adjusted 2.9 percent.

An associate professor of economics from Chinese University, Terence Chong, said the economic decline was worse than expected.

He underlined that a slide in investment also contributed to the contraction, with gross domestic fixed capital formation down 8.3 percent year-on-year.

“The impact of the shutdown of the economy was not only on local consumption, it also affected the confidence of people who were coming to invest in Hong Kong and because of these social distancing measures, we lost a lot of investment from outside,” explained Chong.

He said he expects to see the economy record a small expansion in the second quarter, pointing out that economic activities improved in April.

The government said it expects local demand to pick up as the Covid situation eases.

But it also warned of persisting challenges, with central banks around the world tightening monetary policy as well uncertainty stemming from the Ukraine conflict.