Hong Kong's economy contracted by 3.5% last year, worse than the government's forecast

The Census and Statistics Department announced today (January 1) the advance estimates of GDP for the fourth quarter and the whole year of 2022.

Gross domestic product fell by 4.2% in real terms in the fourth quarter of 2022 from a year earlier, compared with the 4.6% decline in the third quarter.

The drop in GDP was mainly attributable to the persistently weak performance of external trade during the quarter.

Comparing the full year of 2022 with 2021, the GDP will drop by 3.5% in real terms, which is lower than the government's forecast of 3.2%.

A government spokesman said that Hong Kong's economy will continue to record a significant year-on-year contraction in the fourth quarter of 2022.

The decline in exports of goods expanded, but private consumption returned to growth.

According to advance estimates, real GDP will contract by 4.2% in the fourth quarter of 2022 after contracting by 4.6% year-on-year in the previous quarter.

On a seasonally adjusted quarter-to-quarter comparison, real GDP was little changed in the fourth quarter after falling by 2.6% in the third quarter.

Real GDP will contract by a total of 3.5% in 2022 as a whole after an apparent growth of 6.4% in 2021.

With the sharp deterioration of the external environment and the obstruction of cross-border land freight, the overall export of goods plummeted.

Local demand has weakened, first due to the impact of the fifth wave of the local epidemic, and then dragged down by tightening financial conditions.

However, thanks to the stabilization of the local epidemic situation, the gradual relaxation of social distancing measures, the improvement of labor market conditions and the issuance of consumer vouchers, private consumption has improved since the second quarter, especially towards the end of the year.

Looking ahead, Hong Kong's economy is expected to recover in 2023.

While slowing growth in advanced economies will continue to pose challenges for Hong Kong's exports of goods, expectations for faster economic growth in the Mainland and easing restrictions on cross-border freight should provide some support.

With the cancellation of quarantine arrangements for tourists and the resumption of customs clearance between Hong Kong and the Mainland, a strong rebound in inbound tourism is expected to support the recovery of service exports.

Locally, an improving economic outlook as economic activity recovers from the pandemic should boost private consumption in 2023, with a strong labor market providing additional support.

Fixed asset investment will also benefit.

The revised figures and more detailed statistics of GDP in the fourth quarter and the whole year of 2022, as well as the forecast of real GDP growth in 2023, will be published in the 2023-24 Fiscal Year on 22 February 2023. announced during the Budget.