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HK falls into first recession in 10 years

Oct 31. 2019
This undated photo shows the Victoria Harbour in Hong Kong. (PHOTO / IC)
This undated photo shows the Victoria Harbour in Hong Kong. (PHOTO / IC)
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By China Dailyhk/ANN

HONG KONG - Hong Kong slid into recession for the first time since the global financial crisis in the third quarter, advance estimates showed on Thursday, weighed down by increasingly violent anti-government protests and the protracted China-US trade war.

The economy shrank 3.2 percent in July-September from the preceding period, contracting for a second straight quarter and meeting the technical definition of a recession, according to the preliminary government data. 

From a year earlier, the economy contracted 2.9 percent. The readings were the weakest for the Asian financial hub since 2008/2009.

With no end to the protests in sight, the city's leader Carrie Lam Cheng Yuet-ngor warned on Tuesday that full-year growth could contract. Retail sales and tourism have plummeted.

In a press release issued by the Hong Kong government on Thursday, a government spokesman said the city's growth "showed an abrupt deterioration recently due to the severe impacts of the local social incidents."

"With the local social incidents taking a heavy toll on inbound tourism, exports of services recorded the biggest year-on-year drop since the second quarter of 2003," the spokesman said.

Domestic demand also worsened significantly as the weakening economic conditions dampened consumer sentiment, according to the spokesman. The fall in overall investment expenditure steepened amid sagging economic confidence, he added.

The spokesman said in the statement that Hong Kong's exports are unlikely to show improvement in the near term with global economic growth expected to remain soft.

Further details from the release

  • Compared to the same period a year earlier, GDP contracted 2.9% versus the median estimate of -0.3%

  • Hong Kong’s economy is “very likely to record a negative growth for 2019 as a whole”

  • The data are a preliminary assessment; revised 3Q GDP figures will be released on Nov 15

The Hong Kong economy will still face notable downward pressures in the rest of the year as "the adverse impacts of the local social incidents have yet to show signs of abating," and private consumption and investment sentiment "will continue to be affected."

The spokesmand said that economy is very likely to record a negative growth for 2019 as a whole considering the year-on-year contraction of 0.7 percent in the first three quarters and the lack of any signs of improvement in the near term.

The economic debate now is focused on how long the downturn will last, if recent glimmers of stabilization point to a bottom, and if the China-US trade war and the protests have done lasting damage. The city's Financial Secretary Paul Chan said this week that a full-year economic contraction is “very likely.”

The city’s economy has shown the faintest of positive glimmers since the protests’ initial impact this summer, when tourists began staying away. Small business sentiment has ticked higher, as has a gauge of the outlook among purchasing managers, though both remain close to their record lows. The real estate and financial services sectors have remained fairly resilient.

The MSCI Hong Kong Index tumbled as much as 18 percent from an April high, before recently clawing back some gains in October as relative calm descended on financial markets; the index remains positive for 2019. While property prices have slipped about 5.5 percent since June, the Centaline Property Centa-City Leading Index is up for the year, hanging on to gains after a February low.


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