BOFIT Viikkokatsaus / BOFIT Weekly Review 2022/06
Hong Kong posted 6.4 % GDP growth in 2021, slightly exceeding its pre-pandemic GDP. Goods exports provided the main engine of economic growth, rising an impressive 26 % y-o-y. Exports of machinery & equipment were brisk, and accompanied with a significant boost in related capital investment. Import growth (up 24 %) lagged export growth slightly, but the trade balance still remained in deficit. Although retail sales grew by around 8 %, they were still well below pre-pandemic levels. Consumer prices rose by 0.6 %.
In its press release on this year’s Article IV Consultation for Hong Kong, the IMF forecasts growth continuing at the same rapid pace this year. The short-term outlook is clouded by the covid pandemic, however, with the current surge in omicron-variant cases. In recent days, record-breaking case numbers exceeding 600 infections a day have hit Hong Kong. In line with its zero tolerance policy, which is also followed in mainland China, Hong Kong had to tighten already harsh restrictions to keep covid in check. Public gatherings are now limited to two people and the use of covid passports has been expanded to include shopping centres. Family get-togethers are also limited. Beauty salons and houses of worship have been closed.
The latest figures from Hong Kong’s census and statistics department show that the SAR’s population fell by slightly over 1 % last year to around 7.4 million. Hong Kong experienced a net out-migration of about 75,000 people in 2021. The rather modest drop seems to indicate that neither the tightening of Hong Kong’s security laws nor the covid pandemic have done much to precipitate a mass emigration from Hong Kong. The business sentiment survey of foreign firms released by the American Chamber of Commerce in Hong Kong last month found that the majority of respondents were upbeat about Hong Kong’s prospects. On the other hand, 44 % of respondents said they were considering leaving if the strict covid restrictions persisted much longer.