(Bloomberg) -- Hong Kong will inevitably cut its economic growth forecast next week, Financial Secretary Paul Chan said Sunday, citing pressures from the pandemic and the U.S. Federal Reserve’s interest rate rise.
With the likelihood of more Fed rate rises this year and the U.S.’s intention to reduce its balance sheet, global capital supply will be under pressure, Chan wrote in his blog. Hong Kong’s small and medium-sized businesses, already faced with sluggish recovery under the pandemic, will be burdened with higher borrowing costs, according to the financial secretary.
The city’s government forecast real gross domestic product growth for 2022 would be between 2% and 3.5% in February, when record numbers of Covid infections and deaths were reported as a result of the omicron outbreak.
Hong Kong’s economy contracted by 4% in the first quarter, with retail sales dropping 13.8% in March, Chan said. Restaurants in the Asian financial hub reported total revenue of HK$3.93 billion ($500 million) for that month, the lowest figure since records started, Chan wrote.
“These figures all reflected the enormous impact from the fifth wave outbreak on the economy,” Chan wrote. “When domestic demand is still recovering but risks from the external environment continue to grow, these are not ideal conditions for Hong Kong’s economy this year.”
The revised economic forecast will be released next week, said Chan.
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