Hong Kong Special Administrative Region is a special administrative region of the People's Republic of China, which is one of the leading financial and logistics centers in Asia. Due to poor agricultural development, as well as high land prices, Hong Kong is heavily dependent on food imports. The basis of the economy is the service sector — wholesale and retail trade, hotel and restaurant business, various kinds of transport services.
In the second half of the 20th century, Hong Kong was among the economies that demonstrated rapid growth rates, becoming one of the first "Asian tigers". Today, the city is one of the most developed financial centers, whose economy is almost entirely based on foreign trade. The beginning of China's policy of reform and openness led to the outflow of production from Hong Kong to the mainland. The share of the industrial sector has been declining over the past decades, which has caused the transformation of the city from a global manufacturing center to a financial one. Today, the service sector accounts for more than 90% of GDP.
Since the fall of 2019, Hong Kong's economy has entered a recession stage as a result of mass anti-government protests, as well as tensions in trade relations between the United States and China. In 2020, the COVID-19 pandemic had a significant impact on the region's economy, which dealt a severe blow to a number of sectors — trade, public catering and tourism. Due to the effect of deferred demand in 2021, real GDP indicators showed a rapid growth of 6.4%. However , in 2022 Hong Kong's economy shrank by 3.5% again, which was the result of a new wave of coronavirus diseases in China and the introduction of a "zero tolerance" policy for COVID-19 in the country.
With the lifting of strict covid restrictions in Hong Kong, real GDP growth is projected to reach 3.5% in 2023, according to the IMF. However, the projected growth will be constrained by the global economic slowdown, including in the largest countries that are Hong Kong's main trading partners.
By mid-2023, there is a gradual exhaustion of the effect of deferred demand after the lifting of quarantine restrictions, and in the second half of 2023, the expected slowdown in the pace of recovery of real GDP compared to the first and second quarters begins. Despite this, Oxford Economics forecasts a higher growth rate for the year than the IMF at 4.4%, while United Overseas Bank expects Hong Kong's economy to grow by 4.2% in 2023.
GDP by PPP per capita of Hong Kong in 2022 amounted to 69.2 thousand US dollars, and by 2028, according to IMF forecasts, it will reach 92.2 thousand US dollars, demonstrating an average annual growth rate of 4.3% in 2023-2028.
The inflation rate in Hong Kong in 2018-2022 was unstable, and in 2020 the indicator was only 0.3%. However, in 2021-2022, there is a noticeable increase in inflationary pressure against the background of the recovery of economic activity in the city in 2021, as well as an increase in food and energy prices in 2022.
According to the IMF forecasts, in 2023 the inflation rate will be 2.3%. It is expected that in the medium term, further growth of the indicator will be restrained, remaining moderate.