(To watch the full press conference with sign language interpretation, click here.)

Hong Kong’s economy saw a marked deterioration in the first quarter of 2022 as real gross domestic product (GDP) contracted by 4% from a year earlier, reversing the growth trend seen in the previous four quarters.

Government Economist Adolph Leung made the statement when presenting the city’s latest economic figures at a press conference today.

Mr Leung cited slower growth in external demand, epidemic-induced cross-boundary transportation disruptions, the fifth wave of local epidemic and resultant restrictive measures as he explained the GDP contraction in the first quarter.

On a seasonally adjusted quarter-to-quarter comparison, real GPD fell 3% in the first quarter.

Total exports of goods worsened and fell by 4.5% year-on-year in real terms in the first quarter. Exports to the Mainland fell sharply, while those to the US, the European Union and other major markets in Asia posted moderate growth.

Services exports contracted by 2.8% year-on-year in real terms.

Private consumption expenditure declined by 5.5% in real terms from a year earlier amid a drastic fall in people flow and deteriorating labour market conditions.

Overall investment expenditure saw an enlarged year-on-year decline of 8.4% in real terms as business sentiment worsened. 

The labour market was under severe pressure as the seasonally adjusted unemployment rate rose from 4% in the fourth quarter of 2021 to 5% in the first quarter of 2022, reversing the downtrend since early 2021.

Looking ahead, Mr Leung said: “Global economic prospects have worsened which may continue to weigh on Hong Kong’s export performance.

“At the same time, major central banks are expected to expedite their monetary policy tightening in light of rising inflation.

“Domestically, economic activities should see some revival going forward alongside the receding local epidemic and progressive relaxation of social distancing measures. The Government's various support measures including the new round of the Consumption Voucher Scheme, the 2022 Employment Support Scheme and the Temporary Unemployment Relief Scheme, will render additional support.”

Given the worse-than-expected performance in the first quarter, and considering the deteriorating export outlook on the one hand but the expected gradual revival of local economic activities on the other, real GDP growth forecast for the whole of 2022 has been revised down to 1% to 2%, from 2% to 3.5%.

Forecasts for underlying and headline consumer price inflation for 2022 are maintained at 2% and 2.1% respectively.