Hong Kong’s economy — battered by the COVID-19 disruption to global trade and months of political upheaval in 2019 — rebounded more vigorously than expected in the first three months of this year, ending an unprecedented six straight quarters of contraction.
Gross domestic product increased 7.8% in the three months ended March 31, the biggest quarterly year-on-year gain in 11 years and reversing the record 9.1% decline in the corresponding period last year, according to advanced estimates published by the government on Monday.
The rebound marks a v-shaped recovery after a 2.8% decline in GDP in the fourth quarter of 2020. The median estimate of economists surveyed by Bloomberg News was for annual growth of 3.7%.
“The sharp rebound in the first quarter mainly reflected the very strong growth of exports of goods amid the global economic recovery led by mainland China and the United States,” the government said.
On a seasonally adjusted quarter-to-quarter basis, the city’s GDP jumped by 5.3% in real terms from the last three months of 2020, versus the 0.5% increase in the previous quarter.
“The economic recovery was, however, uneven and overall economic activity was still below the pre-recession level, as the pandemic and social distancing requirements continued to weigh on certain economic segments, particularly those involving consumer-facing activities,” the government said, adding that tourism “remained in the doldrums.”
Tommy Wu, chief economist of Oxford Economics in Hong Kong, had earlier pointed out that the city would emerge from the recession, with exports driving the growth. But the weak local employment market might damp the recovery, he added.
It was premature to talk about the full recovery of the economy given the challenges still posed by the COVID-19 pandemic, said ING Group’s chief China economist Iris Pang.
“I don’t think you can define a trend based on just one piece of economic data, especially given the high unemployment rate,” Pang said.
The seasonally adjusted unemployment rate in Hong Kong from January to March was 6.8%, down from 7.2% in the December-February period but still higher than the 6.6% for the final quarter of 2020 — itself a 16-year high and a far cry from the long-term average of 3.7% since 1981.
“The global economic recovery led by the mainland and the U.S. should bode well for Hong Kong’s exports of goods in the near term,” the government said. However, “risk factors such as China-U.S. relations and geopolitical tensions also warrant attention.”
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