Hong Kong may see negative economic growth in 2022

This is due to the rising cost of capital and tightening monetary conditions amongst others. 

Hong Kong may see negative economic growth in 2022 amidst continuing economic challenges, Financial Secretary Paul Chan said. 

Chan cited the rising cost of capital, tightening monetary conditions, and worsening external environment. 

Hong Kong’s GDP decreased by 1.3% year-on-year in the second quarter of 2022, after contracting 3.9% in the previous quarter. 

Despite this, Chan said the banking and financial system of the city remains “highly robust and enviably stable.”

“As bankers, you will certainly laugh off rumours surrounding the stability of the Hong Kong dollar exchange rate. Carry trades arising from interest rate differentials are within the design and expectations of the Linked Exchange Rate System (LERS),” he said. 

“It is indeed nothing new. We all experienced a similar situation during the last interest rate normalisation cycle in the US from 2015 to 2018. That caused no concern on our LERS at all.” 

Read more: GDP dips 1.4% YoY in Q2: advance estimates

Chan also cited Hong Kong’s connectivity with Mainland China which is vital to its competitiveness. 

“Since this new-term Government has assumed office, our goal is to create maximum space for activities to resume and to re-establish business connections, without compromising defences against the pandemic and the health of our residents,” Chan said.