ASIA ECONOMICS: UBS Sees Hong Kong 2021 GDP Growth at 4.8%, Higher Than The Consensus
06:25 AM EST, 02/05/2021 (MT Newswires) -- UBS said that unlike most other economies, Hong Kong already fell into recession ahead of the pandemic shock, due to factors such as the trade war and social unrest.
Also, unlike most other economies, Hong Kong still held "significant" fiscal reserve even after the large stimulus, wrote the bank in a note. Hong Kong's latest macro-prudential matrix still stood at a level that was stronger than all of the post-crisis episodes.
According to UBS, Hong Kong will return to positive growth after two years of contraction. The economy had already shown signs of stabilization despite challenges from the COVID-19 waves. The bank expected Hong Kong's growth to return to
4.8% this year, higher than the market consensus of 4.3%.
Retail sales level had already shown signs of stabilization without visitor flow, noted UBS. Normalization of traveler flows will be a catalyst for cyclical upswings. High unemployment partly reflected the existence of an output gap, but fiscal support could fill
The presence of significant government fiscal power could help to support household income and increase re-employability, as well as to improve infrastructure, kicking off a virtuous circle with better income growth, better consumption and better
overall growth. At the same time, Hong Kong still held a significant role in international trade, with specialization in high value added trades.
This offered a channel for Hong Kong to benefit from a global recovery in the short term and scope for growth in the longer term, according to UBS. The development of the Guangdong-Hong Kong-Macao Greater Bay Area (the GBA), which involved substantial economic cooperation and integration between nine cities in the pearl river delta and Hong Kong and Macao, will be offering one of the most important harbors for different growth drivers to materialize.