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Hong Kong economy shrinks 4% in Q1
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A deadly wave of the Omicron variant of COVID-1 hammered the city
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Private consumption spending fell 5.4% y-o-y in real terms in the first quarter against a 5.3% rise in Q4 2021 while government consumption spending grew 5.9% y-o-y
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Government expects an upturn in the second quarter as business activity picked up in April
The Hong Kong economy contracted by 4% in the first quarter of 2022, ending four straight quarters of growth previously, as the city battled its worst Covid-19 outbreak and global demand moderated, according to advanced estimates the government released on May 3.
GDP decreased by 4.0% in real terms compared with the 4.7% increase in the fourth quarter of 2021, the Census and Statistics Department’s preliminary figures showed. The GDP decline was attributable to the weak performance in both domestic and external demand.
The government said the Hong Kong economy faced immense pressure in the first quarter.
“Externally, moderating global demand growth and epidemic-induced cross boundary transportation disruptions posed substantial drags to exports. 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,” a spokesman said.
“On a seasonally adjusted quarter-to-quarter basis, real GDP fell by 2.9%, having shown little change in the preceding quarter,” he said.
With the Omicron wave receding since early March, social distancing measures have been gradually relaxed. “This, together with the government’s various support measures, should help the revival of domestic demand in the remainder of the year,” the government said.
On May 3, Hong Kong reported 290 new cases, 45 of them involving students as face-to-face classes resume in many schools. The number of new infections was way below the peak of 29,272 confirmed cases on a single day on March 16.
As of May 3, a total of 9,112 deaths were recorded since December 31 last year from the fifth wave of the COVID-19 pandemic involving the highly transmissible Omicron variant.
Analyzed by major GDP component, private consumption expenditure declined 5.4% year on year in real terms in the first quarter, as against a 5.3% increase in the fourth quarter of 2021.
Government consumption expenditure measured in national accounts terms grew 5.9% y-o-y in real terms in the first quarter of 2022, after expanding 4.1% in the fourth quarter last year.
Gross domestic fixed capital formation contracted 8.3% y-o-y in real terms during the quarter, deteriorating from a 0.6% decrease in the fourth quarter of 2021.
Over the same period, total exports of goods measured in national accounts terms declined 4.5% y-o-y in real terms, after ramping up 13.5% in the fourth quarter of 2021. Goods imports in national account terms fell 5.9% in the first quarter, after increasing 9.9% in Q1 2021.
Exports of services slipped 2.8% in real terms in the first quarter, compared with the 6.9% growth in the fourth quarter last year. Imports of services eased 2.8% in real terms in the first quarter versus a 4.5% increase in the final quarter of 2021.
Seasonally adjusted, GDP slowed 2.9% in real terms in the first quarter quarter on quarter.
The government said the global economy will still face challenges in the near term, with major central banks expediting monetary tightening to rein in inflation, the Ukraine war likely to keep global energy and commodity prices high, aggravate supply chain disruptions and dampen economic sentiment while the evolving pandemic and developments in China-US relations still posing uncertainty.
