HONG KONG: Hong Kong’s economy contracted in the first quarter (1Q) of this year, as the city imposed its most stringent restrictions to curb an outbreak of Covid-19 that has battered business, led to an exodus of people and overshadowed the outlook for growth.

       The financial centre’s economy shrank 4% in 1Q from a year earlier, breaking four quarters of growth, amid a weak performance in both domestic and external demand, the government said.

       That compares with a revised growth of 4.7% in 4Q and forecasts for a 1.2% decline by DBS and 1.3% drop by Standard Chartered for 1Q.

       “The global economy will continue to face significant challenges in the near term,” a government spokesman said in a statement, adding that improving the local epidemic situation and government support measures should help lift domestic demand for the remainder of the year.

       Hong Kong’s borders have essentially been closed since early 2020, with few flights landing and hotel quarantine for arrivals damping demand, as the city follows mainland China in implementing a “dynamic zero” coronavirus strategy that aims to curb all outbreaks.

       “Timing of the re-opening of borders will hinge crucially on the Covid situation in both China and Hong Kong,” said Samuel Tse, an economist at DBS Bank. “Our most optimistic assumption is that it will gradually reopen around end-3Q to mid-4Q.”

       On a quarterly basis, the economy shrank by a seasonally adjusted 2.9% in January-March. It is expected to grow 2% to 3.5% this year after expanding 6.4% in 2021, with underlying inflation at 2%. — Reuters