SIMIC

Exports to China were a key driver of the economic recovery as the mainland continues to lead the regional rebound from the pandemic, said the Hong Kong Government.

While Hong Kong's economy posted a record 6.1 per cent contraction overall in 2020, a surge in exports to the mainland beginning in September helped the city to return to quarter-to-quarter growth in the last half.

Chinese New Year was in February this year but in January last year and that timing difference affected the results, the government report said. Companies were on holidays for some of January 2020, while many firms were rushing to get products out the door in January this year before going on holidays this month.

"Looking ahead, the mainland economy is expected to grow strongly, while import demand of the advanced markets should recover further if their epidemic situation gradually stabilises," the report said. "These developments bode well for Hong Kong's exports of goods in the near term."

Hong Kong's economy will return to growth this year and expand between 3.5 and 5.5 per cent, Financial Secretary Paul Chan forecast in his budget speech, although that is dependent on the global rollout of vaccines to spur a return of external demand and international travel.

"We hope that from the second half of the year we will see more vibrancy in the economy," Mr Chan said.

Mr Chan announced more than HK$120 billion of stimulus last Wednesday including HK$5,000 in spending vouchers for each resident and loans for the unemployed. He also proposed raising taxes on stock transactions to generate more revenue and narrow an expected record budget deficit.