HKGCC further slashes 2022 economic forecast

The Hong Kong General Chamber of Commerce (HKGCC) has slashed its 2022 economic forecast down by another 0.5%, down from its February estimate of 1.2%. More than two and a half years of COVID-19 restrictions are taking a heavy toll on businesses and the economy, exacerbated by ongoing supply chain bottlenecks and the war in Ukraine.

Chamber CEO George Leung said the conflict in Ukraine and growing geopolitical tensions have fueled global inflation, which has led the Federal Reserve and other central banks to aggressively raise interest rates. The resultant squeeze on consumers’ spending power, both domestically and in global markets, could have dire consequences on business confidence and their willingness to invest.

“The continued closure of the border between Hong Kong and Mainland China, as well as with the rest of the world, is impeding investment decisions and stifling any prospect of economic recovery. We need a concrete timetable to reopen Hong Kong to ensure we can continue to attract talent to the city and businesses to invest here,” said Leung.

According to preliminary data released by the Census and Statistics Department on 1 August 2022, Hong Kong’s economy shrank by 1.4% in the second quarter of 2022, compared with the same period last year. The continued impact of the fifth coronavirus wave, dragged the city into a recession, . 

The advance estimates also showed that the growth domestic product (GDP) in Hong Kong decreased by 1.4% in real terms in the second quarter of 2022 from a year earlier, compared with the decrease of 3.9% in the first quarter. The decline of GDP was mainly attributable to the weak performance in external trade during the quarter. A recession is defined as a contraction of GDP for two or more successive quarters. The last time Hong Kong fell into recession was in 2020 during the initial phases of the Covid-19 pandemic.

Looking ahead, the worsening global economic prospects will continue to weigh on Hong Kong's export performance in the remainder of the year, with elevated inflation in the advanced economies amid supply-side disruptions and persistent tension in Ukraine. The stepping up of monetary policy tightening by many major central banks in response are expected to dampen economic growth significantly, said a government spokesperson.

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