Stringent social-distancing curbs amid the fifth wave of the coronavirus are expected to hammer Hong Kong’s economy in the first quarter of this year as experts predict a marked slowdown in growth. The forecast followed the city’s battle against an escalating outbreak of the highly contagious Omicron variant, with daily infections hitting more than 100 cases this week – the highest in 18 months. Authorities temporarily closed 15 categories of businesses and set a 6pm curfew for dine-in service at restaurants as part of tightened restrictions since January 7. Top microbiologist Professor Yuen Kwok-yung said that easing social-distancing measures due to expire on February 3 was impossible, warning that cases could take two to three months to contain. The strict measures saw several economists predict growth levels of 1 to 2 per cent at best or a 1 per cent contraction at worst for the first quarter, but noted that recovery would depend on how long the government maintained restrictions on businesses. Simon Lee Siu-po, an honorary institute fellow at the Asia Pacific Institute of Business at Chinese University, estimated the city’s gross domestic product growth for the first quarter could be 2 per cent, compared to 7.9 per cent during the same period last year. Some Hongkongers calling for fresh round of vouchers, but economists not so sure “Given the impact of the Omicron outbreak, I predict that the economic growth will slow down to 2 per cent this quarter. The economy grew at a fast pace last year and there is not much room for rapid growth,” he said. The pace of economic recovery would depend on how efficiently the Covid-19 outbreak was contained and when the city reopened its borders, Lee said. Financial Secretary Paul Chan Mo-po forecast that Hong Kong’s GDP grew 6.4 per cent for 2021, after the city emerged from a pronounced recession and stringent lockdown measures introduced to contain the fourth wave. But Natixis’ senior economist Gary Ng said that he estimated 1 per cent growth for the first quarter of 2022 and 2.8 per cent growth for the whole year, adding that he had taken into account all of Hong Kong’s risk factors. “Amid the pandemic, we already think it is difficult for Hong Kong to reopen its borders with China in the immediate future so we have taken a conservative view about the economy,” he said. Ng described last year as a sharp economic rebound but said the city could not rely on private consumption to achieve strong growth in 2022. ING Bank Chief Greater China Economist Iris Pang predicted the economy would contract by 1 to 2 per cent in the first quarter and could enter into a recession. Pang also warned that many companies could close due to a lack of cash flow “if the business restrictions drag on for two more months.” Catering and retail industry representatives also said that a wave of business closures looked increasingly likely. “The catering industry will lose up to HK$14 billion (US$1.79 billion) for the first two months as they miss out on the golden season for reaping profits,” said Ray Chui Man-wai, the chairman of catering industry body Institute of Dining Art. He also estimated that 500 to 1,000 eateries could close down “instead of paying expensive rent to their landlords” if business restrictions continued after the Lunar New Year holiday. Simon Wong Kit-lung, who runs 39 eateries that employ 700 people under the LH Group, said that a vaccine bubble should be introduced as soon as possible, calling a zero-Covid strategy unsustainable for restaurants. Wong noted that the vaccine bubble was intended to help businesses continue operating during an outbreak, but authorities were currently forcing places to close whenever there was a rise in cases. Hong Kong food importers warn of rising costs amid coronavirus restrictions “The government should think about whether it’s worth it for society to sacrifice so much,” he added. Catering sector lawmaker Tommy Cheung Yu-yan said many restaurants saw “no end in sight” to their woes, estimating losses of as much as HK$8 billion for the industry if the measures continued for two to three months. “There needs to be another HK$20 billion to HK$30 billion relief for the catering industry alone and quickly, or we cannot last another two weeks,” he said. Liberal Party lawmaker Peter Shiu Ka-fai, who represents the wholesale and retail sector, suggested the government could introduce more consumption vouchers and financial aid to temporarily closed businesses to alleviate the situation. “The government’s previous financial support helped in the short term, but not so much in the medium to long term. If the situation were to last for another two to three months, many businesses will not be able to endure,” he warned. At the same time, Hong Kong’s exports and imports face headwinds as a result of stricter quarantine rules on aircrew. “Airfreight capacity is extremely tight, resulting in a surge of logistics costs by 30 to 40 per cent,” said Hong Kong Association of Freight Forwarding and Logistics chairman Gary Lau. “Increases in logistics cost will be passed on to Hong Kong consumers who will have to pay more for goods such as premium food, fresh produce, pharmaceuticals and e-commerce goods over the next few weeks.” Additional reporting by Kathleen Magramo