Hong Kong recovery continues with 7.5% second-quarter growth

Hong Kong recovery continues with 7.5% second-quarter growth
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(July 30): Hong Kong’s economy grew slightly slower than expected in the second quarter, with the recovery set to get a boost from the distribution of consumption vouchers beginning this weekend.

Gross-domestic product rose 7.5% from a year earlier, following a revised 8% growth in the prior quarter, according to advance data released Friday by the Hong Kong government. That compares with the median estimate of 7.8% in a Bloomberg survey of economists. On a quarter-on-quarter basis, a better reflection of growth momentum, GDP shrank 1%, compared with a forecast contraction of 0.8%.

Hong Kong’s economy is gradually recovering from a historic two-year recession spurred on by the pandemic and political protests. Retailers and tourism-related businesses have been hit particularly hard with borders shut, and the consumption vouchers are one way authorities are trying to offset that burden.

The uneven 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.

The city is now distributing electronic vouchers worth HK$5,000 (US$643) to permanent residents and eligible immigrants aged 18 and older to help sustain the recovery. The program will cost the government an estimated HK$36 billion, with Financial Secretary Paul Chan estimating it would provide a 0.7 percentage-point bump to this year’s GDP, according to an April government report.

“I do expect a good recovery in private consumption under a stabilized pandemic situation in the second quarter,” Aries Wong, a lecturer with Hong Kong Baptist University, said before the GDP report. “We should continue to see a moderate recovery in private consumption and business activities.”

The vouchers follow last year’s cash handouts of HK$10,000 to residents, but will go only so far in restoring confidence amid the pandemic.

“The scheme’s effectiveness may be impacted if the pandemic situation worsens again,” Annie Yau Tse, chairman of the Hong Kong Retail Management Association, said before the data.