Inflation in Hong Kong: Are we in trouble?

Introduction

Let's start with a question; What was the price of a chocolate bar when you were younger? Some people may say 6 dollars (HKD), and if you’re old it can even go as low as 50 cents! But nowadays you can find that they can go up to 15 dollars per bar! It's generally not much of a difference, but have you ever wondered why? 

Hong Kong is known for being the “Global Finance Hub” where you can bring in lots of imported goods and travel them through HK’s Airports and Sea ports. And international trade is no simple feat as we require large amounts of resources and currency.

What is Inflation?

Inflation of currency is a common thing among countries, so much so you may not even realise it's happening. Inflation can be caused by a variety of factors that can change the worth of a currency, as an example Inflation can happen when a government makes money worth less by making more of it. Currency worked in ancient times by being Scarce, Valuable and tradeable for other things. Societies would use valuable things that were hard to find, like gold. But even with gold we found more of it in the earth, meaning that the gold value has depreciated over time. This is the same problem with paper money because it can be printed. (Odna, n.d.).

How is Hong Kong handling Inflation? 

Inflation in Hong Kong has fluctuated over the years due to different factors such as the Covid-19 Pandemic and the trades coming in and out of Hong Kong. In Hong Kong the inflation rate of consumer products changes over time, It was at its highest change in rate in 2011 when it was around 5.31 % higher than its previous year, In 2023-24 it has been relatively stable holding a roughly 2.0 - 2.5% increase per year (Textor, 2024).

Economic State of Hong Kong

To see if this is a problem in HK we should look at the economic state of the government and its people. The GDP per capita of Hong Kong in the past years have fluctuated, With the Pandemic causing economic decline in lots of trades and businesses as the lockdowns were hard on local businesses. In 2020 from the recovery of the pandemic it was 55,900 (USD), In 2021 it was at 60,000 (USD), and in 2022 it was at 58,500 (USD) (CIA World, 2024). According to Trading Economics it is estimated that in 2024 the GDP per capita will be around ±60,000 USD (Hong Kong, 2024). 

And the Real GDP Purchasing Power Parity (PPP) in Hong Kong as of late has changed since the pandemic as well. In 2020 it was 418.129 Billion,  In 2021 it was 445.064 Billion In 2022 it was 429.592 billion (CIA World, 2024).

Conclusion

Now onto the big question, Should we be concerned? Short answer: Not Really. Long Answer: As stated earlier Inflation is a regular thing in most currencies as they get printed to make more bills in circulation. And as the world moves on, so does the economy. And the government has been putting actions in place to help combat high inflation rates, And the Economy is sitting stable currently and is planned to be that way for the next 5 years. Of course, anything can happen in those next few years like another pandemic or a mass exodus of HKD in trade of consumer products and commodities. 

So for now, Companies will increase their prices of products and services with inflation and demand. This hasn't been a big problem in the past few years. As an example; I had used this website (Apparel price inflation, 1913 - 2024) which is used to calculate the value of a clothing product in the US over time from 1913 all the way up to 2024. I have used this to use the price of an article of clothing (A t-shirt) in 2024 (12.68 USD or 99 HKD) and see what it would be worth in the year 2000. And across 24 years, US inflation has only grown by 1.66% which is $ 0.21 USD difference in value.

There are a variety of factors that affect and rely on the value of currency so there is no way to accurately say if inflation will be a bigger issue in the future. But it is a regular thing and governments across the world are making plans to combat and adapt to inflation to prevent further depreciation of economic value for civilians.

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