Hong Kong’s economy is expected to perform better in the second half of this year and achieve growth of 2% to 3.5% in real terms for the year as a whole, though the city’s economic outlook in the first quarter is not expected to be strong.

Unveiling his 2022-23 Budget today, Financial Secretary Paul Chan told lawmakers that the city’s economy and people’s livelihoods have been under immense pressure in recent months as the rapid worsening of the fifth wave of the epidemic, coupled with a further tightening of various restrictive measures, led to a drastic fall in people flow and seriously dampened consumer and economic sentiments.

“Inevitably, economic activities, particularly the consumption-related sectors, will continue to be under intense pressure in the short term. Unemployment and underemployment situation will also deteriorate,” Mr Chan said.

As long as the recent wave of the epidemic can be gradually put under control, and the status of “dynamic zero infection” can be maintained down the road, consumption and investment demand will likely gather steam again.

A stabilised epidemic situation will also create favourable conditions for the gradual and orderly resumption of quarantine free travel between the Mainland and Hong Kong, thereby injecting greater impetus into the economy.

On inflation, he expected external price pressures will remain high and persist for some time, while domestic cost pressures will also increase gradually alongside the economic recovery. He forecasted that the headline inflation rate and the underlying inflation rate will be 2.1% and 2% respectively this year.

The finance chief said in the medium term, the economic outlook for Hong Kong is positive. The sustained high-quality development of our country’s economy will serve as the key driver of global economic growth, and provide the most solid foundation for Hong Kong to prosper and develop.

He predicted Hong Kong’s economy will grow by an average of 3% per annum in real terms from 2023 to 2026, slightly higher than the trend growth of 2.8% during the decade before the pandemic. The underlying inflation rate will average 2.5%.