A general view of residential buildings in West Kowloon District, Hong Kong on April 11, 2023. (ANDY CHONG / CHINA DAILY)

Hong Kong’s economy is expected to make a gradual recovery in the second half of this year, according to forecasts released by various institutions.

The Quarterly Hong Kong Macroeconomic Forecast published by the University of Hong Kong indicated that the city’s economy grew by 2.7 percent in the first quarter of 2023, reversing the 3.5 percent decline in real GDP in 2022.

Citibank predicted that Hong Kong is moving towards economic recovery in the wake of the COVID-19 pandemic, with expected further GDP growth from 2.8 percent year-on-year to 6.1 percent year-over-year, and full-year GDP to grow 4.5 percent

It is projected that Hong Kong's GDP will continue to grow, with a 3.8 percent and 5.4 percent increase in the second and third quarter respectively this year. As a result, the economy is expected to surge by 4.6 percent over the course of 2023 as a whole, which represents a one percentage point upward adjustment from the previous forecast.

According to the Census and Statistics Department, the total retail sales volume in Hong Kong increased by 16.5 percent in May 2023 compared with a year earlier. The figure shows double-digit growth for sixth consecutive months, which was driven by strong local consumer sentiment and the rebound in the number of visitors.

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The university claimed that the employment situation in Hong Kong has returned to pre-pandemic levels. It projected the unemployment rate would decrease slightly from 3 percent in the second quarter to 2.9 percent in the following quarter. The continued implementation of tight contractionary monetary policies overseas has resulted in high interest rates, leading to a slowdown in the global economy and reducing external demand for Hong Kong.

Citibank predicted that Hong Kong is moving towards economic recovery in the wake of the Covid-19 pandemic, with expected further GDP growth from 2.8 percent year-on-year to 6.1 percent year-over-year, and full-year GDP to grow 4.5 percent. The economy experienced a K-shaped recovery with consumption proving stronger and trade weaker , the Citibank Outlook report for the second half of 2023 stated.

The report said that if Hong Kong takes advantage of new opportunities and enhances its superconnector role, investment confidence could become more firmly established as the retail and services industries rebound. Additionally, significant trade improvements are expected in the second half of the year.

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“The throughput of goods vehicles at the land boundary control point in May 2023 was only 60 percent of the amount before the pandemic, and it is expected to take a longer time to recover due to Hong Kong's inadequate transportation capacity,” said Adrienne Lui, an economist at Citibank.

The bank predicted that as the US Federal Reserve is anticipated to achieve its terminal rate in the second half of this year, the foreign exchange rate for the Hong Kong dollar is expected to shift from a hike cycle to a phase of pausing. This transition is expected to allow the Hong Kong dollar to US dollar exchange rate differential to reach its lowest level and set the stage for a rebound.

According to the Market Outlook for mid-year 2023 released by Julius Baer, a Swiss private banking group, 2023 is being referred to as the "year of cool-down," with economic momentum and inflation figures proving to be slower and stickier than expected on the macroeconomic front. The bank expects global growth disparities to decrease, with US and European growth cooling down, and China catching up.

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Julius Baer’s China strategist and head of research Hong Kong Richard Tang stated: "The US may continue to reduce interest rates, and interbank balances may not be substantial, so Hong Kong’s interbank offered rate may remain at a high level for a period of time without experiencing a significant decline."