Economic growth is projected to pick up gradually from the second half of 2021, boosted by the progressive reopening of the border, reaching 3.5% in 2021 and 3.8% in 2022. Private consumption will remain robust, supported by the recent minimum wage increase and the wealth effect from rising house prices. Investment will expand on the back of strong house prices, record high issuance of building permits and large public infrastructure projects gaining momentum. Inflation pressure will strengthen as economic slack disappears by end-2022.
The pace of vaccination needs to accelerate to reduce the risk of new outbreaks and pave the way for full border reopening in 2022. While the Wage Subsidy and other support schemes helped to preserve jobs, the government should now strengthen income support and training during job transitions to enhance reallocation of workers toward high-growth sectors. Housing supply must increase swiftly to curb excessive house price inflation and growth in household indebtedness.