Residents buy vegetables in a market in Hong Kong on February 12, 2022. Photo: VCG

A downward revision is inevitable in Hong Kong's growth forecast for this year, but its economy is set to gradually recover as the city is emerging from the fifth wave of COVID-19, Financial Secretary of the Hong Kong Special Administrative Region (HKSAR) Paul Chan Mo-po said on Sunday. 

The selection of Hong Kong's new chief executive, who has vowed to boost the city's global competitiveness, is also expected to rev up the local economic recovery, according to a veteran observer.

The COVID-19 pandemic continues to put pressure on people's livelihoods, societies and economies across the world, Chan said in a blog post on Sunday, citing the city's lackluster first-quarter economic performance.

The HKSAR's GDP fell by 4 percent in real terms in the first quarter from the year before, the city's Census and Statistics Department revealed on Tuesday, ending a streak of yearly expansion over the previous four quarters amid weak demand at home and abroad.
Private consumption shrank 5.4 percent in real terms, while gross domestic fixed capital formation plunged 8.3 percent. The city's merchandise exports declined 4.5 percent, per the Tuesday announcement. 

Retail sales plunged 13.8 percent in March and the first-quarter reading slid 7.6 percent, Chan disclosed in his blog on Sunday. The catering sector was even harder-hit, with local restaurants recording revenues of HK$3.93 billion ($500.65 million) in March, the lowest monthly tally on record. The first-quarter number totaled HK$15.1 billion, the lowest in nearly 16 years.

All this shows the huge impact on the local economy from the peak of the fifth wave of the coronavirus, Chan wrote.

Growth will improve along with the gradual containment of the virus and the recovery of local economic activity. Nonetheless, it will still take time for the economy to reboot internally while the external environment remains elusive, he continued.

The US Federal Reserve's rate hike decision last week, the sharpest in 22 years with half a percentage increase in its key funds rate, and rate hikes of 25 basis points by both the UK and Australian central banks, were enumerated among external uncertainties.

"We're re-examining the economic growth forecast and will release the latest forecast next week. Currently, it seems a downward revision is inevitable," Chan said.

In his budget address in February, Chan put the city's economic growth at a range of 2-3.5 percent in real terms this year. The HKSAR's economy expanded 6.4 percent in 2021.

Hong Kong's economy is fairly internationalized, subject to the pandemic evolution and global economic fluctuations, Tian Feilong, a member of the Chinese Association of Hong Kong and Macao Studies, told the Global Times on Sunday.

Tian was upbeat on a turnaround in the local economy as he derived confidence from the newly elected chief executive designate.

By securing 99.16 percent support in voting on Sunday, John Lee Ka-chiu was chosen as the sixth-term chief executive designate of the HKSAR.

A push for improved regional and international competitiveness of Hong Kong is a highlight of Lee's policy agenda, Tian said.

"The election of the new chief executive, exemplifying patriots governing Hong Kong, would tremendously ease the city's internal frictions and gather strength for its economic rebooting," he said.

Lee was formerly Hong Kong's chief secretary for administration. Sunday's chief executive election was the first since the improvement to the HKSAR's electoral system have been implemented.

Hong Kong's is expected to explore new paths for growth beyond its traditional industries, the expert stressed, betting on the city's closer connectivity with the Chinese mainland through the Guangdong-Hong Kong-Macao Greater Bay Area initiative to enable new growth engines for its economy.