Hong Kong is set to quit the year during a full-blown recession, as COVID-19 custody and spiraling income prices knock the economy.
The Chinese city’s financial policy schemes with the Federal Reserve because its currency, one of the cornerstones of its business hub reputation, is pegged to the US dollar.
Quarantine, once as long as three weeks, has now been decreased to three days and the government has gestured it may soon join the rest of the world in scrapping travel curbs.
“There are very high chances for Hong Kong to record a negative GDP growth for this year,” Financial Secretary Paul Chan told reporters. He further adds that “Hong Kong has been raising interests at a pace that was never seen in the past three decades,”
Hong Kong is one of the world’s prosperous places, a per capita country, although there is a rooted imbalance.
The city has strong fiscal reserves but they have been weakened by the pandemic.
The Hong Kong Monetary Authority followed the Fed’s hikes and notified banks may soon lift their prime interest rates delayed this year, earning borrowing additional expenses. So far major banks such as Standard Chartered and HSBC have resisted following the Fed but the HKMA has warned it is “very likely” it may have to obey suit, especially if more Fed hikes come in November.
“The public should be prepared for the Hong Kong dollar interbank rates to rise further,” HKMA Chief Executive Eddie Yue states to reporters on Thursday.
Hong Kong also saw a slump in 2019 when months of huge and sometimes vicious democracy protests roiled the city.
