HKGCC 2021 Economic Forecasts: Hong Kong Expected to Return to Positive Growth in 2021

The Hong Kong General Chamber of Commerce (HKGCC) unveiled its 2021 economic forecast today (17 Dec), which envisages real GDP growth of 3.5% and headline inflation increasing by 1.4%.

“Hong Kong has had a very tough 2020, and we forecast the economy will contract by 6% for the year as a whole, but we expect a return to positive growth of 3.5% for the coming year,” HKGCC’s CEO George Leung said.

Hong Kong's Real GDP

The Chamber’s forecast is based on Covid-19 vaccines becoming widely available, which should help bring the coronavirus pandemic under control in Hong Kong and internationally, and allow some cross-border activities to be relaxed. Besides, Sino-U.S. relations are expected to be more predictable under the Biden Administration.

“There are a number of stabilizing factors coming on stream, and with the economy coming off a low base, we should expect to return to positive growth in 2021. However, we will need to be patient,” said Leung. “The road to recovery is likely to be bumpy, depending on how long it takes to complete the immunization programme. We hope the Government can speed up the inoculation timeline in order to protect the population and help our recovery.”

Hong Kong slipped into deflation in the second half of 2020, as tourists stayed away and households tightened their belts. But headline inflation for 2020 should be flat at 0.3%, before rising in 2021 to 1.4%. As economic activity and tourism remain stagnant, the Chamber estimates that retail sales will fall by 24% for the full year of 2020, but rise by 1.5% in 2021 as Covid-19 restrictions are eased.

“On unemployment, as the Employment Support Scheme expired in November, more jobs – in particular those in the worst affected sectors, including retail, travel and hospitality – are now at risk. So we expect the unemployment rate in Hong Kong to rise to 7% by the end of this year, before easing to 4.8% by the end of 2021, by which time the economy should be gradually recovering,” he said.

HKGCC Economic Forecasts 2020 2021
Real GDP Growth -6% 3.5%
Headline Inflation 0.3% 1.4%
Unemployment Rate (year-end) 7% 4.8%
Retail Sales Growth -24% 1.5%