Hong Kong Q3 GDP grows 5.4%, sees frozen tourism as a constraint

HONG KONG: Hong Kong's economy lost momentum in the third quarter as exports slowed, and the bounce from last year's pandemic-induced slump has largely run its course, with longer-term prospects hanging on the impact of the city's zero-COVID policy.

The global financial hub is following Beijing's lead in pursuing strict travel restrictions against the global trend of opening up and living with the coronavirus.

Hong Kong's government bets a tightening in quarantine and patient discharge rules in recent weeks may eventually sway Beijing to ease border restrictions between the semi-autonomous city and mainland China, its primary source of growth.

On the other hand, international business lobby groups have warned Hong Kong may lose talent and investment as well as competitive ground to rival finance hubs such as Singapore unless it eases travel curbs.

Analysts say the restrictions may lead to an uneven recovery. While consumer spending improves as the coronavirus is prevented from re-entering the community, tourism, luxury goods sales, and other services will suffer.

The preliminary third-quarter gross domestic product (GDP) estimate of 5.4 per cent year-on-year released on Monday (Nov 1) compares with a growth rate of 7.6 per cent in the second quarter and forecasts of 5 per cent by DBS and 5.7 per cent by ING.

On a quarterly basis, the economy expanded by a seasonally adjusted 0.1 per cent in July-September. That compared with a contraction of 0.9 per cent in the previous quarter.

The government said the global economic recovery should further support Hong Kong's merchandise exports, while improving employment and income conditions together with a Consumption Voucher Scheme should support consumption-related sectors.

"Inbound tourism remained virtually frozen, posing a constraint on the pace of economic recovery," a government spokesman said in a statement.

Developments in China-US relations and geopolitical tensions required attention, the government said, amid disputes over Taiwan, Xinjiang, climate, trade and the former British colony of Hong Kong itself, among other issues.

For the first nine months, the economy grew 7mper cent on-year.

The government had earlier forecast a full-year economy growth of 5.5 per cent to 6.5 per cent for 2021.

The trade-reliant city has been benefiting from mainland China's swift recovery from the COVID-19 crisis. But as Hong Kong is transferring more eggs from the global basket to China's, the country's growth rates are slowing amid power shortages and wobbles in the property sector.

The number of Chinese firms headquartered in the city rose to 252 this year from 238 in 2020. The number of US and Japanese firms dropped, however, to 254 from 282 and 210 from 226, respectively, government data showed.