David Dodwell

Inside Out | Hong Kong’s economic woes are almost entirely the result of three years of Covid-19 self-harm

Hong Kong must not look to blame a challenging external environment now when its severe zero-Covid regime has strangled its vital travel, tourism and services industries, leaving damage that may be permanent

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Pedestrians cross a road in front of closed shops in Causeway Bay, Hong Kong, on August 1. Photo: Nora Tam

David Dodwell

Published: 9:15am, 29 Aug 2022

With so many countries beleaguered by soaring inflation, crippling debt, unprecedented droughts and floods, food and energy shortages, and armed conflict, it seems curmudgeonly to wring hands over Hong Kong’s seemingly modest travails.

After all, inflation is just 1.9 per cent, compared with 8.5 per cent in the US and 10.1 per cent in Britain, where predictions are for an alarming 18 per cent next year. Neither energy nor food are discernibly in short supply, and the recent typhoon Ma-on caused minor inconvenience compared with the droughts and floods across China, the United States and Europe.

The Hong Kong government has downgraded its forecast for the economy this year to -0.5 per cent to 0.5 per cent, after gross domestic product contracted by 3.9 per cent in the first quarter, and 1.3 per cent in the second. Ditching the earlier forecast of 1-2 per cent growth, Financial Secretary Paul Chan Mo-po now says it is touch and go whether we see economic growth.

But his tone is less alarmist than that of US Federal Reserve chairman Jerome Powell or Bank of England head Andrew Bailey. At the Jackson Hole financial summit in Wyoming on Friday, Powell’s warning that he “must keep at it until the job [of staunching inflation] is done” sent shivers across Western equity markets. US share prices fell 3.4 per cent on Friday, and 1.7 per cent in Europe.

In contrast, Chan is upbeat about the stimulus provided by the latest tranche of consumption vouchers, and sees the November Hong Kong Sevens rugby event and Global Financial Leaders’ Investment Summit as major steps towards economic recovery.

02:33

Hong Kong to revise GDP forecast downwards: finance chief Paul Chan

My concern is that he seems to make light of the challenges, and has been obfuscating the severity of harm inflicted on our economy over the past three years, some of it perhaps permanent.