Hong Kong will likely report an economic growth slowdown in Q2 compared to the first three months of the year, according to Financial Secretary Paul Chan.

This is due to a spending boom that helped Hong Kong exit the recession, which is starting to decelerate.

The forecast by the government published on Sunday was announced ahead of official GDP data on Monday. Economists had predicted the government’s data would reveal an increase in GDP growth to 3.5%, year-on-year, a rise from 2.7% in Q1, Bloomberg reports.

The Financial Secretary said the year-on-year growth rate “may be slightly slower” than the rate between January and March. Nevertheless, the economy was still on course to improve for the remainder of the year as consumer spending continued to rally and the external environment steadily improved. 

Hong Kong is beginning to recover following the strict Covid controls that battered the economy and led residents to leave. The economy exited recession in Q1 as borders reopened, and there was an increase in spending.

Chan added that residents’ consumer habits have altered following three years of pandemic-fuelled restrictions, which may impact the outlook, the Bloomberg report adds. Residents have lowered their spending in the evening, the Financial Secretary added, whilst Shenzen has become a popular shopping and tourist destination.

Private consumption also remained a major economic growth component, Chan stated. Following a 24% year-on-year rise in retail sales in Q1, they reached 17% in April and May, Global Times reports. These figures have now exceeded 80% of the levels registered during the same time in 2018.

He added that Hong Kong will continue to play a key role as a “dual gateway”, connecting the Chinese mainland and global markets. This is forecast to help enterprises on the mainland increase their international presence and attract global businesses, talent and capital to Hong Kong.

In addition, economists forecast GDP growth decelerated to 0.9% quarter-on-quarter, down from 5.3% in Q1.