Cutting the quarantine period for arrivals in Hong Kong will not significantly boost local gross domestic product stunted by Covid-19 restrictions, economists have warned, as they predicted anaemic growth of between 0.75 per cent and 1.5 per cent for the year.
The experts all said that only reopening the city’s borders with mainland China and resuming quarantine-free travel would help revive the economy as the measures would reboot tourism-related sectors, such as retail, hotel and aviation.
In an exclusive interview with the Post this week, Financial Secretary Paul Chan Mo-po indicated he might have to further downgrade the city’s annual gross domestic product (GDP) forecast in August, pointing to the weak recovery of an economy still reeling from the impact of the fifth wave of the coronavirus.
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Chan pointed out that while consumption had picked up, exports and investments remained sluggish, saying quarantine rules had been the “most critical constraint that we are facing and we have to overcome” in trying to improve economic recovery.
The Post earlier reported that health officials were “actively considering” cutting the week-long hotel quarantine period for arrivals to three or four days, with authorities hoping at the same time to launch a mainland China-style two-colour health code to better control the movement of infected patients and incoming travellers.
Iris Pang, chief economist for Greater China at financial services firm ING, said that even if the quarantine period was reduced, the economic impact would be extremely limited so long as the border with the mainland remained closed.
“The move could help spur the economy but the impact will be very little,” she said. “It can increase air travel business, as well as bookings of air tickets and hotels. But it won’t help our inbound tourism as foreign travellers will no longer visit Hong Kong where they are still required to undergo quarantine.”
Pang estimated GDP would contract by 1 per cent in the second quarter but rebound to 0.75 per cent growth for the whole year provided Hong Kong reopened its borders with the mainland in the final quarter.
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Fully vaccinated travellers are currently required to stay at designated quarantine hotels for seven days and undergo four polymerase chain reaction tests in the first two weeks of their arrival, as well as take daily rapid antigen tests while in isolation.
A total of 148,009 people have entered the city so far in July, which has surpassed the year’s monthly arrival record set in June, when there were 136,994 visitors. By comparison, Hong Kong welcomed just 63,141 arrivals in January when travellers were required to undergo three weeks’ quarantine in hotels. The Tourism Board said there were 41,112 tourists arriving in Hong Kong in June, up 563 per cent year on year.
Before the pandemic, the city logged 65.15 million visitor arrivals in 2018, generating a total of HK$331.7 billion (US$42.25 billion) tourism dollars, compared with just 91,398 arrivals in 2021, a drop of nearly 99.9 per cent.
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Chinese University economist Terence Chong Tai-leung estimated Hong Kong needed to attract more than 1 million visitors each month before the economy enjoyed significant growth.
“That could only be achieved by opening up its borders with the mainland. Unless there is something drastic otherwise, a piecemeal measure won’t help much with the city’s GDP,” he said. “Singapore is a good example as it has recorded a strong economic rebound after easing travel restrictions for vaccinated travellers.”
Chong forecast that the economy would grow by 1.5 per cent for the year following a strong rebound in the second half of the year. But he warned no growth was likely in the second quarter as exports slowed due to lockdowns on the mainland.
Hong Kong’s economy contracted by 4 per cent year on year in the first quarter, which led the government to downgrade its forecast for 2022 to 1-2 per cent growth from 2-3.5 per cent. Singapore, by comparison, reported 3.7 per cent growth in the first quarter.
“I expect that China’s economy will pick up strongly with economic stimulus measures and Hong Kong will greatly benefit from it,” Chong said. “Hong Kong will need to fully open up like Singapore to really revive the economy.”
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Gary Ng Cheuk-yan, a senior economist at Natixis Corporate and Investment Bank, said the firm continued to predict local GDP would increase by 1 per cent in 2022, adding that any reduction of the quarantine period would not help the economy much.
“When global travellers can go to other quarantine-free places such as South Korea and Singapore, why would they bother to come to Hong Kong, which still sticks to its Covid-19 policy and requires travellers to undergo quarantine for a few days?” he said.
The expected cut in the quarantine period could at most increase arrivals by one fold, accounting for about 8 per cent of the annual number before the pandemic, or roughly 56 million in 2019, he said.
Ng agreed the city’s economy would be greatly boosted if it reopened its borders with the mainland, provided there were not too many conditions imposed on travellers.
“It all depends on whether there will be a change in the Covid-19 policy,” he said.
More from South China Morning Post:
- Hong Kong hotelier hopes for restriction-free travel as industry slowly returns to pre-pandemic heyday across the world
- Time to ‘get away’: Hong Kong residents cooped up by Covid pandemic take flight as travel bug bites, never mind soaring airfares
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