Hong Kong’s economy shrank by 3.4 per cent in the third quarter as compared to a year ago as the coronavirus pandemic continued its stranglehold on key drivers of growth such as tourism and consumption.
The financial hub has now spent five consecutive quarters locked in recession, although the government is expecting some improvement on the back of resurgent growth in mainland China.
The gross domestic product figure released by the Census and Statistics Department on Friday is an improvement from the 9.1 per cent and 9 per cent declines registered in the first and second quarters, respectively.
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But the bar for year-on-year comparison was already significantly lowered by the pummelling the economy took from social unrest that erupted during the same period last year, when a 2.8 per cent contraction was recorded.
A government spokesman said economic performance in Hong Kong, measured in terms of inflation-adjusted GDP, gained some ground over the previous quarter.
“An improved external environment led by the solid expansion of the mainland economy, some revival in sentiment in the latter part of the quarter amid the stabilisation of the local epidemic situation, and stronger financial market activity all contributed,” he said.
But the level of economic activity between July and September was still notably lower than before the recession, he noted.
The decline in private consumption narrowed in the third quarter, to 7.7 per cent year on year, compared with 14.2 per cent in the second quarter.
But the government’s consumption expenditure grew at just 6.4 per cent in the third quarter, slower than the 9.7 per cent in the second quarter.
On a quarter-to-quarter comparison basis, the GDP rose 3 per cent in the third quarter from the previous one.
Large parts of Hong Kong’s economy suffered throughout July and September as pandemic-control measures upturned regular life. Restaurants were forced to operate at reduced capacity, bars and pubs were shut and closed borders sent arrivals plunging by 99 per cent compared to a year ago.
About three-quarters of all confirmed Covid-19 cases and 93 per cent of related deaths occurred during the quarter, with medical experts only declaring the wave to be in its final stage in the middle of October.
Schools, meanwhile, closed early for summer holidays, while hundreds of thousands of white-collar workers, including about 180,000 civil servants, spent most of the third quarter working from home.
Businesses began laying off workers, and authorities on October 20 announced the unemployment rate had jumped to 6.4 per cent between July and September, from 6.1 per cent between June and August, a near 16-year high.
One of the city’s oldest travel agencies, Citizen Thunderbird Travel, with more than 100 staff, revealed on Friday it would suspend operations on December 1 due to the Covid-19 “disaster” that had left the sector in “complete meltdown”.
The 48-year-old company saw “no silver lining at the end of the tunnel”. It was not immediately clear if the closure would be permanent. The Post has contacted the company for clarification.
Still, Kelvin Lau Kin-hang, Standard Chartered Bank senior economist for Greater China, said the third quarter economic performance was better than market expected.
“We expect China’s continuous economic recovery and the United States’ easing monetary policy will help improve Hong Kong’s economy further,” he said. “However, the substantial restrictions on global travel, challenging external economic conditions and poor local job market will continue to cloud the city’s economy.”
Financial Secretary Paul Chan Mo-po said earlier this week the pressure on Hong Kong’s economy would be eased on the back of the mainland’s recent economic rebound if the local infection situation remained under control.
On a full-year basis, the government has forecast that Hong Kong’s GDP will shrink anywhere from 6 to 8 per cent.
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