Hong Kong economy contracted 1.3% in second quarter

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Hong Kong economy contracted 1.3% in second quarter

A photo taken on May 29, 2022 shows the Two International Finance Centre IFC in Hong Kong. LI GANG XINHUA HONG KONG KONG - Hong Kong's economy contracted 1.3 percent in the second quarter from the same period a year ago, government data showed on Friday, after a weak performance in external trade during the period.

In the second quarter, GDP was 1 percent higher than three months earlier, according to seasonally adjusted GDP.

READ MORE: Standard Chartered: Hong Kong economy to remain flat this year.

There are rising inflation, cooling global demand, and weak consumer sentiment in the trade-reliant city that are significant risks for the recovery, analysts say.

The growth pace for the second quarter was higher than in the previous quarter, which had a decline of 3.9 percent. The advance estimate for the second quarter had a 1.4 percent contraction.

Since early 2020, the city's economy has been negatively impacted by COVID 19 restrictions, including battering bars, restaurants and shops.

The outlook for the global financial hub was overshadowed by increasing inflation rates globally and an uncertain geopolitical situation, although the prospects of a revival in the mainland economy should offset risks, the government said.

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A government spokeswoman said that the deteriorating external environment will weigh heavily on Hong Kong's export performance in the rest of the year.

The expected revival of the mainland economy should provide some offset as the inflation in the advanced economies and the tightening of monetary policy by many major central banks in response will further weaken the global growth momentum. The government revised down its full-year growth forecast to between 0.5 and minus 0.5 percent from 1 percent and 2 percent, citing a deteriorating global growth outlook, while the underlying inflation estimate for 2022 was 2 percent.

The government has announced this week that it will shorten the mandatory hotel quarantine period for all arrivals to three days from seven.

Gary Ng, senior economist at Natixis Corporate and Investment Bank, said that the latest quarantine policy is encouraging for aviation and outbound tourism, but not so much for the overall economy.