Hong Kong Faces Q1 Economic Contraction Due to China Lockdown... Limited Rebound Expected

[Asia Economy Reporter Kim Hyunjung] Due to the mainland China's strict zero-COVID policy, trade transactions in Hong Kong, a 'financial hub,' have come to a halt, leading to a forecasted economic decline in the first quarter of this year.

On the 2nd (local time), Bloomberg reported that a survey of 11 economists projected Hong Kong's Gross Domestic Product (GDP) for the first quarter of this year to decrease by 1.3% compared to the previous year. This marks the first negative growth since the unprecedented recession at the end of 2020.

Hong Kong's retail sales in February plummeted by 14%, and exports in March fell by 8.9%, indicating severe economic damage signs in the first quarter. During this period, the city implemented strict quarantine measures such as banning dining in restaurants after 6 p.m., and closing gyms and beauty salons, following thousands of deaths and over one million confirmed COVID-19 cases.

It is also difficult to expect an economic rebound in the second quarter. The transportation system between the mainland and Hong Kong has not yet normalized, and according to official statistics, exports from Hong Kong to China in March decreased by 12.8% compared to a year earlier.

Additionally, the Hong Kong dollar, which operates under the fixed exchange rate system known as the 'dollar peg,' is linked to the US dollar's value. It is inevitably affected by the US monetary tightening policy. The US Federal Reserve (Fed) is scheduled to raise interest rates again this week, and the Hong Kong Monetary Authority (HKMA) must respond accordingly. Some analysts have suggested that policy intervention by the HKMA may be necessary.

Moreover, in Hong Kong, which heavily depends on tourism, the key to growth ultimately lies in the full reopening of the city. However, the mainland's zero-COVID policy is unlikely to be eased in the short term, further darkening Hong Kong's growth outlook.

This content was produced with the assistance of AI translation services.