Mainland real GDP is projected to increase by 3.4% in 2021 and 3.7% in 2022, with the gradual lifting of restrictions as the vaccine rollout progresses unleashing demand. Mainland activity connected with the petroleum sector is expected to rise in light of the revival in oil prices. Labour market recovery will continue. Inflation will ease in the near term, as the effects of energy price increases taper off, and pick up only gradually thereafter.
The additional government support made available to households and businesses should remain in place until economic recovery is well established and risks of further disruption have dwindled. The central bank should push back the start of rate rises if economic recovery looks weaker than projected. Government policy should now turn to structural improvements that help business sector productivity and competitiveness and to making further advances in environmental policy, including cost-effective investment in the green transition.