(Bloomberg) — Hong Kong’s economic system posted its quickest progress in additional than a decade within the first quarter, although the restoration is an uneven one led primarily by exports and held again by weak client spending and a sluggish vaccine rollout.
After declining for a document six quarters, gross home product surged 7.8% from a 12 months earlier, advance information confirmed Monday, beating all estimates in a Bloomberg survey of economists. The figures had been partly distorted by the low base a 12 months in the past when the economic system was in lockdown, however the quarter-on-quarter enlargement, a greater reflection of progress momentum, additionally outperformed.
The newest information present an export sector that’s booming however consumption that continues to be subdued. The metropolis’s inns and retail outlets are reliant on tourism spending, particularly from guests from the mainland, and border closures have damage these sectors. Low vaccination charges are hindering town’s capacity to reopen and totally rebound from the pandemic.
“Having a high vaccination rate is important to have the border open between Hong Kong and China and also between Hong Kong and other foreign economies,” mentioned Iris Pang, chief economist for Greater China at ING Bank NV. “Without the border open economic activities will only grow slowly.”
Hong Kong has endured its most economically difficult two-year stretch in its historical past, posting unprecedented back-to-back annual contractions in 2019 and 2020 as town grappled with waves of political unrest, fallout from the deteriorating U.S.-China relationship, and the Covid-19 pandemic.
The economic system has not too long ago confirmed indicators of stronger restoration. Exports surged above HK$400 billion ($51.5 billion) for the primary time ever in March whereas unemployment dropped essentially the most since 2003 within the month, easing again from a 17-year excessive. Retail gross sales by worth jumped 30% in February, the primary enhance in that measure since January 2019.
The authorities will announce revised figures for the primary quarter in addition to its newest projections for full-year progress on May 14. Financial Secretary Paul Chan has beforehand estimated the economic system will broaden 3.5% to five.5% in 2021, however that’s more likely to be revised larger now, given the sturdy first-quarter progress.
Citigroup Inc (NYSE:). raised its full-year progress forecast by 2 proportion factors to six%, whereas Goldman Sachs Group Inc (NYSE:). economists upgraded theirs to 9.2% from 4.6%.
Still, financial exercise stays beneath pre-recession ranges because the pandemic and social distancing measures proceed to weigh on client spending and tourism, the federal government mentioned in its report Monday. While export demand is about to stay sturdy, “the revival of tourism-related activities will likely be slow in view of the still austere pandemic situation in many places around the world,” it mentioned.
“Gradual relaxation of social distancing bodes well for domestic activities,” mentioned Raymond Yeung, chief economist for Greater China at Australia and New Zealand Banking Group Ltd. “What’s concerning is the relatively slow vaccination rate and the variant of virus strain. The government will maintain a tough stance in virus control measure.”
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