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Hong Kong saw continued GDP growth in the second quarter of the year, coinciding with a relaxation of social-distancing rules. Photo: K. Y. Cheng

Hong Kong economy grows 7.5 per cent in second quarter, reflecting receding coronavirus crisis and improving global outlook

  • Official forecast shows economy is on the path to recovery as business prospects brighten across the world and with Covid-19 in retreat locally, government says
  • Year-on-year quarterly growth continues at highest levels seen for a decade amid a relaxation of social-distancing rules
Hong Kong’s economic rebound continued in the second quarter of 2021, with gross domestic product growing 7.5 per cent year on year as business activities revived amid a relaxation of social-distancing rules.
The advanced forecast by the Census and Statistics Department on Friday showed the Hong Kong economy was on the path to recovery, a government spokesman said, with global commercial conditions improving despite the coronavirus pandemic.

The new figure maintains the trend of Hong Kong posting its highest levels of year-on-year quarterly growth for a decade.

Over the first half of 2021 as a whole, real GDP grew 7.8 per cent from the same period the previous year.

“Looking ahead, the global economic recovery should continue to support Hong Kong’s exports of goods in the near term, though there may be some moderation from the exceptionally strong performance in the first half of 2021. Exports of services should likewise sustain growth,” he said.

Exports of goods were robust – soaring 20.3 per cent over a year ago and surpassing the peak reached in the same period of 2018 – while imports were 21.4 per cent up on the same period last year, the spokesman said. But tourism remained in the doldrums due to the pandemic.

“Consumption-related activities improved further, but were still notably below their pre-recession levels. It is thus essential for the community to strive towards more widespread vaccination so as to pave the way for a broader based economic recovery,” he said.

Private consumption increased by 6.5 per cent over a year ago, compared with the 2.1 per increase in the first quarter, while government consumption grew by 2.9 per cent from a year ago.

“Overall investment expenditure saw accelerated growth amid improved business sentiment, though [it was] helped by a low base of comparison,” the spokesman said.

In the first quarter of 2021, Hong Kong swung from its worst recession ever to its fastest economic growth – a revised figure of 8 per cent – in more than a decade, a V-shaped rebound that followed a record 9.1 per cent contraction in GDP from the same period last year, when the coronavirus pandemic was ramping up.

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The first three months of the year also marked an end to six straight quarters of economic decline stretching back to the second half of 2019.

The government has 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.

Last week, Financial Secretary Paul Chan Mo-po told the Post that the city’s economic recovery in the first quarter had spilled into the second, boosting the likelihood of upgrading the full-year GDP forecast to above that original forecast.

He also said Hong Kong’s economic prospects hinged on controlling the pandemic and reopening the border with mainland China as soon as possible.

Hong Kong businesses benefited in the second quarter from the easing of social-distancing rules and the introduction of a ‘vaccine bubble’ scheme. Photo: May Tse

The city’s unemployment rate also eased to 5.5 per cent in the three months to June – a level not seen in more than a year.

Carie Li Ruofan, an economist with OCBC Wing Hang Bank, maintained her forecast of economic growth of between 5 per cent and 6 per cent for the whole year, saying she expected the government’s HK$36 billion consumption voucher scheme to give a strong boost to the city’s economy in the third quarter.

The scheme entitles eligible Hong Kong residents to HK$5,000 worth of e-vouchers, with the first instalment of HK$2,000 going out on Sunday.

The initiative is expected to contribute 0.7 per cent to the GDP this year, and Li said this would give investors “a shot in the arm” and help bring in more investments.

However, whether Hong Kong could make a full economic recovery depended on when it could reopen the border and resume international travel, she added.

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ING Bank Greater China economist Iris Pang said a boost to local consumption and the decline in unemployment rate would continue to contribute to local economic growth.

However, she warned that reopening the border with mainland China and the impact of Covid-19 variants were factors which could affect the city’s economic recovery.

“The most important thing is the reopening of the border with mainland China. Without any inflow of visitors the city’s retail sector can’t fully recover,” she said.

In late April, shortly before the end of the city’s fourth wave of coronavirus infections, the government rolled out its so-called vaccine bubble scheme, further easing social-distancing restrictions for certain businesses based on the inoculation status of their staff and customers.

Since the end of the fourth wave in May, Covid-19 infections have dropped sharply, with the city confirming no local cases for over 50 consecutive days.

This article appeared in the South China Morning Post print edition as: relaxation of rules fires rebound