Hong Kong’s economy was expected to shrink by 6.1 per cent this year – the lowest on record – the government said on Friday after weighing the city’s performance in the first three quarters and the cushioning effects of its massive coronavirus relief measures.
The latest figure was revised from an estimated contraction of between 6 per cent and 8 per cent in August.
The last time Hong Kong recorded such a sharp decline was in 1998 in the post-Asian financial crisis period, when there was a contraction of 5.9 per cent. Records of the data started in 1985.
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Gross domestic product (GDP) contracted by a worse than expected 3.5 per cent in the third quarter compared with a year ago as the coronavirus pandemic continued to hammer key economic drivers such as tourism and consumption, the Census and Statistics Department said on Friday.
The figure was revised from a preliminary 3.4 per cent in late October, signalling that the city has been locked in recession for five consecutive quarters, despite showing a marked improvement from the 9.1 per cent and 9 per cent declines registered in the first and second quarters, respectively.
The bar for year-on-year comparison, however, was significantly lowered by the pummelling the economy took from social unrest that erupted in the third quarter last year, when a 2.8 per cent contraction was recorded.
The government on Friday also adjusted its inflation forecast for the year to minus 1.3 per cent, from minus 1.8 per cent in August.
Government economist Andrew Au Sik-hung said that provided that the coronavirus situation remained well contained in Hong Kong, the local economy would likely see a modest improvement in the fourth quarter.
“Consumption and business sentiments have turned less gloomy in the more recent months. Yet the near-term outlook will hinge critically on the local Covid-19 situation,” he said.
He warned of uncertainties in the global environment as the recent surge of Covid-19 infections in many overseas countries might slow the pace of their economic recoveries while the widespread travel restrictions would also continue to hammer Hong Kong’s inbound tourism.
“As for the external environment, the global economy has recovered at a faster than expected pace so far, but the short-term outlook still faces considerable uncertainties. On the bright side, the mainland economy is expected to post further strong growth,” he said.
The decline in private consumption narrowed in the third quarter, revised to 8.2 per cent year on year, compared with 14.2 per cent in the second quarter.
On a quarter-to-quarter comparison basis, GDP rose by a revised 2.8 per cent in the third quarter from the previous one.
Large parts of Hong Kong’s economy were at a standstill throughout July to September as tightened social-distancing measures dampened social and economic activities. Restaurants were forced to operate at reduced capacity, bars and pubs were shut and closed borders sent arrivals plunging by 99 per cent year on year.
Businesses began laying off workers, and the latest unemployment rate climbed to a near 16-year high of 6.4 per cent between July and September, from 6.1 per cent for June to August.
The government has rolled out more than HK$300 billion (US$38.7 billion) in packages amid the economic slump.
Simon Lee, co-director of the international business and Chinese enterprise programme at Chinese University, said he expected the economy would continue to contract in the first half of next year as the coronavirus situation had become unstable recently with daily cases of untraceable infections.
“Whether or not the economy can rebound hinges on the pandemic situation. I believe the recession will continue until we have a large amount of vaccine supply. For this we may have to wait until after the first half of next year before we can see any light,” he said.