(Bloomberg) -- DBS Group Holdings Ltd. and United Overseas Bank Ltd downgraded their full-year growth forecasts for Hong Kong after the economy shrank more than expected in the first quarter because of Covid curbs.
DBS cut its 2022 forecast to 1.7% from 2.4%, citing global supply chain disruptions, the “dwindling pace” of the labor force and rising interest rates that will hamper investment recovery. UOB shaved its prediction to around 1.3% from 1.7%.
In the meantime, Citigroup Inc. raised its second-quarter growth projection to 2.4% from 0.3% as the Asian financial hub sped up measures to re-open. It maintained its full-year growth forecast at 2.2%.
DBS economist Samuel Tse said the lockdowns in China “will negatively impact re-export in the months ahead.” He also cited a shrinking labor force, adding that an outflow of higher-skilled workers in financing and professional business services “will dampen the long-term competitiveness of the regional financial center.”
UOB said that while the first-quarter contraction of 4% in gross domestic product was likely the low point, “the economy remains weighed by significant uncertainties ahead.”
Citi's revision to quarterly GDP growth was based on a faster-than-expected decline in infections and a decision to relax some Covid-related restrictions quicker than originally intended. However, the full-year forecast was kept unchanged at the low end of the government's estimate, since a “genuine” recovery “depends ultimately on the resumption of quarantine-free travel” between Hong Kong and China, it said.
©2022 Bloomberg L.P.
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