Yes, despite the global crises due to COVID 19, Hong Kong’s economy rebounded with stronger than expected growth of 7.8 per cent in the first quarter of 2021, posting an 11-year high after a historic low a year ago.
The advanced forecast by the Census and Statistics Department on Monday showed a V-shaped rebound in gross domestic product (GDP) from an all-time low of a 9.1 per cent contraction in the same period last year.
The performance was the best since the first quarter of 2010, when the economy grew 7.9 per cent. It also marked the end of a six-quarter decline, which began in the third quarter of 2019.
“The sharp rebound in the first quarter mainly reflected the very strong growth of exports of goods amid the global economic recovery led by mainland China and the United States,” a government spokesman said.
He added that growth bounced back from the 2.8 per cent decrease recorded in the preceding quarter. On a quarterly basis, GDP jumped 5.3 per cent from the last three months of 2020.
“The economic recovery was, however, uneven and overall economic activity was still below the pre-recession level, as the pandemic and social-distancing requirements continued to weigh on certain economic segments, particularly those involving consumer-facing activities,” he said.
Tourism remained in the doldrums, he added. Exports were fuelling growth in the first quarter – soaring 30.6 per cent – while imports were 23.3 per cent up on the same period last year.
Also a factor in the rebound was government consumption expenditure, which grew 6.7 per cent year on year, higher than the 6.1 per cent recorded for 2020’s fourth quarter.
But private consumption remained weak, recording just 1.6 per cent growth between January and March, albeit a swing from the 6.9 per cent decline in the previous quarter.
Carie Li Ruofan, an economist with OCBC Wing Hang Bank, said first-quarter performance was much better than her growth estimate of 3.5 per cent.
“Still, comparing the average rate of the first quarter this year and last year with the figure in the first quarter of 2019, shows the latest performance has yet to return to the pre-Covid-19 level,” she said.
“The vaccination rate, which will weigh on border reopening, tourism and consumer spending, will be crucial to the city’s economic recovery.”
She added the government’s HK$81 billion package of one-off sweeteners this year, and HK$100 billion of public works spending in each of the next few years, would offer a shot in the arm for the economy.
George Leung Siu-kay, CEO of the Hong Kong General Chamber of Commerce, called on the government to focus on reviving the local economy and supporting small- and medium-sized enterprises, as he noted exports growth would not help most city businesses.
“The key to this is to reopen the border with the mainland,” he said. “The next two quarters’ numbers are expected to be highly uncertain despite the positive growth coming off a low base [of comparison].
“As we have seen in India, new waves of the coronavirus can be highly devastating. Until we start nearing herd immunity, it will be difficult to return to the pre-pandemic level of economic activity.”
Hong Kong’s borders have been largely closed since February last year, eliminating the flow of tourists into the city.
Financial Secretary, Paul Chan Mo-po said earlier that the city’s economic recovery hinged on the ongoing vaccination drive, significant spending on public works and capitalising on growing business opportunities across the border.
However, the city’s vaccination rate is lower than in Britain, the US and Singapore. Of Hong Kong’s population, 12.6 per cent have received a shot of Covid-19 vaccine, and 7.19 per cent have been given both doses. The target for herd immunity is 70 per cent.
The government projected that full-year GDP would grow by between 3.5 per cent and 5.5 per cent, compared with a 6.1 per cent decline last year – the worst on record.
Britain-based research institute Capital Economics assistant economist Sheana Yue described GDP growth in the first quarter as impressive, and way above her 2.3 per cent forecast.
“With the coronavirus situation under control, the recovery will continue to gain momentum in the coming quarters,” she said.
This article was originally published on South China Morning Post