Hong Kong Gross Domestic Product growth and 2022 forecast

Hong Kong’s economic growth was expected to reach 6.4 percent in 2021, marking a recovery from two years of recession as the government controlled the COVID-19 outbreak.

Hong Kong recovered from recession to expansion in Q1 of 2021, with real GDP growing by seven percent YoY in the first three quarters. Hong Kong’s economy expanded 5.4 percent YoY in the third quarter of 2021, slowing slightly from a 7.6 percent uptick in Q2 - in line with forecasts. 

Improved economic performance was boosted by robust export levels, improved local consumption due to the government’s consumer voucher program, and an increased vaccination rate as well as stable epidemic situation. 

However, with the re-emergence of COVID19 in early 2022 causing trade disruptions and worsening consumer sentiment as well as deteriorating global prospects, Hong Kong’s economy contracted by 4 percent YoY in real terms in Q1 of 2022, after an expansion of 4.7 percent in Q4 of 2021. The government of Hong Kong revised GDP growth forecasts from 2-3.5 percent to 1-2 percent for 2022.

Foreign Direct Investment trends

Foreign Direct Investment inflows to Hong Kong increased by HK$ 16633 billion (US$ 2122.7 billion) in Q4 2021. Despite the social and economic challenges presented by the COVID19 pandemic since 2020, business sentiment remains positive with companies still setting up or remaining invested in Hong Kong. According to surveys by the local government, the number of business operations in Hong Kong with parent companies overseas or mainland China rose by 10 percent from 8225 in 2017 to 9049 in 2021.

Although foreign direct investment (FDI) inflows to Hong Kong were suppressed in 2019 due to protests, in 2020, Hong Kong’s FDI inflows rebounded sharply by 61.7 percent to HK$ 935.68 billion (US$119.2 billion). This ranks Hong Kong as the third strongest economy in the world by FDI inflows in 2020, up from seventh in 2019.

In 2020, global FDI inflows to Hong Kong were valued at HK$ 935.68 billion (US$119.2 billion), ranking the country at 3rd globally, behind the United States and Mainland China. In terms of FDI outflows, valued at HK$ 802.23 billion (US$102.2 billion), Hong Kong ranked 4th globally after Mainland China, Luxembourg, and Japan.

According to forecasts, Foreign Direct Investment in Hong Kong is expected to reach HK$ 14000 billion (US$ 1783.52 billion) by the end of 2022. Further, the Hong Kong Foreign Direct Investment is projected to trend around HK$ 17000 billion (US$ 2165.7 billion) in 2023.

Hong Kong trade trends

Goods consumed in Hong Kong and for exports are both largely based on imports. Hong Kong is an export-oriented economy with almost all shipments attributed to re-exports.

The country is also one of the most services-oriented economies globally, with the sector accounting for 93.5 percent of the Gross Domestic Product in 2020.  

Exports from Hong Kong jumped 25 percent YoY to a record high of HK$ 478.04 billion (US$ 60.9 billion) in November 2021 - primarily boosted by sales of electrical machinery, apparatus, appliances, and related parts (30.2 percent); office machines and automatic data processing machines (48.3 percent); and telecommunications and sound recording and reproducing apparatus and equipment (13.6 percent). Shipments rose primarily to Mainland China (24.1 percent), the US (32.2 percent), Japan (11.5 percent), and Taiwan (63.0 percent)

Imports to Hong Kong grew by 20 percent YoY, hitting a record high of HK$ 489.43 billion (US$ 62.35 billion) in November 2021 - driven by electrical machinery, apparatus, appliances, and related parts (21.2 percent); miscellaneous manufactured goods (50.6 percent); and office machines and automatic data processing machines (37.5 percent). Among major import partners, imports increased from China (26.3 percent), Taiwan (38.3 percent), Singapore (21.9 percent), and Korea (15.2 percent).

Nevertheless, Hong Kong’s trade deficit widened to HK$ 37.3 billion (US$ 4.71 billion) in March 2022 from HK$ 27.0 billion (US$ 3.44 billion) for the same period in the previous year. Imports declined for the first time since August 2020 amid a massive virus outbreak, declining by six percent YoY to HK$ 410 billion (US$ 52.23 billion). 

By 2023, Hong Kong’s balance of trade is forecasted to trend around negative HK$ 32 billion (US$ 4.08 billion).

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