Hong Kong raised its economic growth forecast for 2021 as the government slowly eases virus control measures and cash vouchers help to drive spending in a city hit by the pandemic and protests before that, Bloomberg reports.
The city now projects gross domestic product growth of 5.5% to 6.5% this year, compared with an earlier range of 3.5% to 5.5%, the statistics department said in a release Friday.
The government also raised its year-on-year GDP figure for the second quarter to 7.6% from an advanced reading of 7.5%. On a quarter-on-quarter basis, a better reflection of growth momentum, GDP shrank 0.9%, the finalized data showed. Forecast for underlying inflation is maintained at 1%.
“Domestically, if the epidemic remains stable, the improving labor market and the boost from the consumption voucher scheme will help stimulate consumer demand,” government economists said at a briefing Friday. Vaccination is essential to “a fully-fledged economic recovery,” they added.
The economists also noted a number of uncertainties ahead, including the delta variant outbreak, U.S.-China relations, geopolitical tensions and major global central banks’ evolving monetary policy stance.
Hong Kong’s economy has faced an uneven recovery from two years of contraction, with retailers and tourism-related businesses particularly hard hit as borders remain shut and travel curtailed to stop the spread of more infectious variants of Covid-19.
Financial services and the property market are booming though. Home prices jumped to the highest level since record began in 1993 on low mortgage rates and rising demand, a separate report showed.
The unbalanced recovery has exposed deepening wealth imbalances between the city’s working class and elite. Tourism, consumer and services industries are the biggest employers of many of Hong Kong’s working class.
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In a sign of improvement, the unemployment rate in the consumption and tourism-related sectors fell visibly in the second-quarter, according to the government economists.
Consumer spending also picked up sharply, growing 6.8% in the second quarter from a year ago, up from 2.1% in the first three months of the year.
The government has begun distributing HK$5,000 ($642) consumption vouchers to eligible residents to encourage spending. The program will cost an estimated HK$36 billion and provide a 0.7 percentage-point bump to this year’s GDP, according to an April government report.