Hong Kong has tipped into a technical recession, impacted by soaring interest rates, strict Covid measures and weaker global trade.

There was a 1.4% fall in Q2 GDP it was reported on Monday, as per advance estimates published by the Census and Statistics Department. This followed a 3.9% drop in Q1.

This downturn is in contrast to last year’s 6.3% economic growth following the slowdown in 2019 and 2020 as a result of the massive pro-democracy protests and the pandemic.

The government stated the economic improvement was smaller than forecast due to a weak performance in external trade.

Statistics released in July revealed the value of total exports of goods in Q2 fell by 4.2% compared to Q1. In addition, there was a trade deficit of $206.1 billion in the first half of the year, amounting to 8.2% of the value of imports of goods.

"Weakened global demand and continued disruptions to cross-boundary land cargo flows between the mainland and Hong Kong weighed heavily on Hong Kong's exports," the government stated.

Central banks’ policy tightening is forecast to considerably stifle global economic growth, whilst quarantine-free travel between Hong Kong and the mainland still has no clear timeframe within Beijing’s zero Covid policy.

Hong Kong’s Chief Executive John Lee said his government will shortly unveil a further reduction of hotel quarantine restrictions for international arrivals.

"Connecting with the world and with the mainland, we shall do both and they are not contradictory," Lee told the Hong Kong Economic Journal.

"I understand that one of Hong Kong's competitiveness lies in its international connections."

Hong Kong continues to have some of the strictest Covid measures in the world, such as a limit of four people in group gatherings and a week-long quarantine for arrivals.