After rebounding in 2021, the Hong Kong economy contracted 4% in Q1 of 2022 after the city’s worst Covid-19 wave and harshest restrictions yet.
As the city slowly recovers after its worst outbreak yet, government data reported that Hong Kong’s economy shrank 4% January through March in 2022, as many businesses struggled or even ceased operations following increased restrictions brought on to control the wave.
To combat the wave, the government closed schools, banned public gatherings, and strictly restricted dining in at restaurants in February. Unfortunately many small businesses had to close as a result of the multi-month outbreak that infected at least 60% of the population and killed over 9,200.
Throughout the course of the pandemic, Hong Kong has enforced tight travel restrictions, such as flight bans and a 21-day quarantine.
Hong Kong’s Census and Statistics Department (C&SD) said private consumption dropped in Q1 of 2022, compared to a 4.7% on-year growth of gross domestic product (GDP) October to December the previous year.
“The decline of GDP was attributable to the weak performance in both domestic and external demand,” the C&SD commented.
The last time the city experienced a quarterly contraction was October through December, 2020. And last year, after two years of recession, Hong Kong’s economy bounced back by 6.4%.
However, as the city recovers and lifts lockdown measurements, such as reduced quarantine to 7 days for arrivals and the reopening of restricted businesses, economists are hopeful that economic activity can bounce back in the financial hub. Case numbers have dropped from a high of almost 30,000, at the peak of the fifth wave, to below 400 daily.
This may be a slow recovery however as Hong Kong’s unemployment rate rose to 5% by the end of Q1 of 2022, the city’s highest in nine months.
Financial Secretary, Paul Chan, wrote it would “take some time for the unemployment rate to recede.”
The government has put in place an Employment Support Scheme to support employees and businesses most impacted by the pandemic, offering subsidies of up to HK$8,000, and has also introduced a new Consumption Voucher Scheme giving out HK$10,000 to residents, encouraging them to spend and kickstart economic recovery.
For the remainder of the year, Hong Kong’s economy is projected to grow 2% to 3.5% in 2022, while Fitch Ratings amended their projection to 1% for the year.
Further restrictions were lifted on Tuesday, the 3rd of May, marking the reopening of bars, beaches, and extending restaurant opening hours to midnight.
