Budget Speech
Economic Situation in 2022
7. In 2022, the external environment deteriorated markedly. With the Russia-Ukraine conflict driving up international energy and commodity prices and rampant global inflation, major central banks sharply tightened their monetary policies, posing a drag on the performance of advanced economies. The Mainland's economic growth also slowed amid the subdued global economy and the fluctuating epidemic situation. The International Monetary Fund (IMF) estimated that global economic growth decelerated to 3.4 per cent last year.
8. Amid moderated growth across major economies, decelerated growth in manufacturing and trading activities in Asia as well as the continued disruptions to cross-boundary truck movements between Hong Kong and the Mainland caused by the epidemic, Hong Kong's total exports of goods posted a notable decline of 13.9 per cent in real terms last year.
9. As for trade in services, exports of transport services and financial services both declined. Exports of travel services recorded a surge alongside the progressive relaxation of quarantine requirements for visitors, but remained far below the pre-epidemic level. Total exports of services declined mildly by 0.9 per cent for the year as a whole.
10. Domestically, the outbreak of the fifth wave of the epidemic early last year and tightened financial conditions weighed heavily on domestic demand. Nevertheless, with the local epidemic situation stabilising, and the Government's counter-cyclical measures and disbursement of consumption vouchers making key impacts, employment conditions improved continuously. Private consumption expenditure has gradually revived since the second quarter, but still recorded a drop of one per cent for the year as a whole. Dampened by the subdued economic outlook and rising borrowing costs, overall investment expenditure fell by 8.5 per cent.
11. With both external and domestic segments hit hard, the Hong Kong economy contracted by 3.5 per cent in 2022. Nevertheless, the labour market showed improvement, with the seasonally adjusted unemployment rate declining gradually to the latest 3.4 per cent after rising to 5.4 per cent early last year.
12. Inflation remained moderate in overall terms. While prices of individual items such as food, energy, and clothing and footwear recorded more notable increases, price pressures on other major components were largely contained. Private housing rentals also fell. Netting out the effects of the Government's one-off measures, the underlying inflation rate was 1.7 per cent for last year as a whole.
13. Dampened by factors including tightened financial conditions, slackened global growth and heightened geopolitical tensions, the Hong Kong stock market continued to correct during most of last year and trading activities shrank. Nevertheless, amid market expectations of a slower pace of interest rate hikes among major economies and an accelerated return of the local economy to normalcy, the Hang Seng Index rebounded strongly by the end of the year.
14. The residential property market underwent a marked correction last year. Flat prices dropped by 15.6 per cent during the year. The number of transactions plunged by almost 40 per cent to a low level of about 45 000. The non-residential property market also turned quiet.
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