Hong Kong’s Economy Seen Contracting in 2022 as GDP Slumps

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Economists downgraded their forecasts for Hong Kong’s economy, predicting it could contract for the third time in four years, after data Monday showed growth is being weighed down by Covid restrictions and a slump in trade, Bloomberg News reported. Goldman Sachs Group Inc. expects gross domestic product to decline 0.5% in 2022, down from an earlier prediction of 0.3% growth. Bloomberg Economics now sees GDP shrinking 0.6% compared with a previous projection of 0.7% expansion. The downgrades follow Monday’s worse-than-expected data showing the economy contracted 1.4% in the second quarter from a year earlier. While some relief is expected for Hong Kong in the second half, the recovery is uncertain given the drag on demand and trade from Covid restrictions locally and in mainland China. Growth momentum is also coming under pressure as Hong Kong raises interest rates in line with the hawkish Federal Reserve to maintain the local dollar’s peg to the US dollar. Separate data released Tuesday showed consumer spending remained under pressure. The value of retail sales fell 1.2% in June from a year ago, weaker than economists expected. Sale volumes dropped 4.1%, led by falls in purchases of clothing and electronics, government data showed. Read more.