Policy Address

II. Challenges and Opportunities

5. Our governing tenets are to uphold "One Country, Two Systems", strengthen the economy and improve people's livelihoods. Our policy directions are to sharpen our edge and grasp the opportunities, while addressing our shortcomings and any potential risks. Our policy objectives are to make Hong Kong a better place for all – for people to enjoy a better living environment, students to receive quality education, young people to fully realise their potential, and the elderly to be well taken care of. We aspire to create a cohesive and caring community, with a vibrant economy where everyone can enjoy life.

6. This year, Hong Kong came out of the pandemic with strength. The Government has launched a host of campaigns and measures, including "Hello Hong Kong", "Happy Hong Kong" and "Night Vibes Hong Kong", to attract visitors and boost local consumption. The economy is recovering and people's incomes are improving. The real Gross Domestic Product (GDP) in the first half of the year saw a 2.2% increase, year-on-year, and the latest unemployment rate dropped to 2.8%, reflecting nearly full employment. The economy is set to reverse last year's negative results and resume growth this year.

7. Inbound tourism and local consumption have been the key drivers of our economic recovery. Average daily visitor arrivals are steadily rising, and reached nearly 70% of the level over the same period in 2018 this summer. Private consumption expenditure grew by 8.2%, year-on-year, in real terms in the second quarter, and total value of retail sales increased by more than 15%, year-on-year, in July and August, resuming to 85% of the level over the same period in 2018. As the aviation and related sectors gradually resume handling capacity, the number of visitor arrivals is expected to increase. The improvement of the economy and the labour market, alongside measures launched by the Government to sustain economic recovery, will boost private consumption.

8. Nevertheless, the external environment remains challenging. The world is undergoing unprecedented changes. Coupled with the successive interest rate hikes of advanced economies, designed to tame high inflation, the outlook of the global economy has been undermined, putting pressure on Hong Kong's economy. Our total goods exports and our investment and assets markets have been negatively impacted. At the same time, we face keen competition from other economies, while tackling internal challenges such as our ageing population and manpower shortage.