Hong Kong’s economy shrank a “much worse-than-expected” 0.4 per cent in the second quarter this year from the preceding quarter in revised figures that heralded a looming technical recession, the government said on Friday.
Government economist Andrew Au Sik-hung said the contraction, revised from the 0.3 per cent decrease revealed earlier this month, marked the weakest economic conditions since 2009.
Au attributed the poor performance to the intensifying US-China trade war and technology tensions, subdued economic conditions and various headwinds.
Although there was no direct mention of the current unrest rocking the city, he warned that recent local “social incidents” had caused significant disruptions to inbound tourism and consumption-related activities, further dampening economic sentiment and hurting the city’s reputation as an international financial and business centre.
Chief Executive Carrie Lam Cheng Yuet-ngor said earlier this month that the unrest had played a role in the city’s economic woes.
Two successive quarters of negative growth are classed as a technical recession.
On a year-on-year basis, gross domestic product was revised to a 0.5 per cent increase, lower than the 0.6 per cent rise it announced earlier this month.
Financial Secretary Paul Chan Mo-po warned on Thursday of a technical recession if the economic performance continued to worsen between July and September. He pared the forecast for full-year growth to anywhere between 0 and 1 per cent from 2-3 per cent previously.
Au said Hong Kong faced “substantial downside risks”.
“Looking forward, global economic growth should soften further in the near term,” he said. “Domestically, private consumption and investment sentiments will continue to be affected by subdued economic conditions and mounting headwinds.”
He pointed out that trade, one of the city’s four pillar industries, would remain sluggish or even weaken further in the following months. In June, exports dropped 9 per cent year on year.
The city’s trade promotion body, the Trade Development Council, recently downgraded its forecast on exports to 2 per cent growth this year from 5 per cent previously.
The four pillar industries are financial services, trading and logistics, tourism and producer and professional services.
To ease the economic pains, the government launched a basket of relief measures worth HK$19.1 billion (US$2.4 billion) on Thursday, including sweeteners for businesses and residents.
The Hong Kong General Chamber of Commerce, the city’s biggest business group, welcomed the measures, especially for badly hit sectors such as retail, tourism and logistics.
“Many of our members have been telling us the US-China trade dispute and local demonstrations are starting to bite into their bottom line,” chamber chairman Aron Harilela said.
“Large businesses will be able to absorb the effects of the downturn, but smaller businesses, many of which depend on their business turnover for their livelihood, will no doubt be very relieved about the support measures.”
With an aim to protect jobs and support enterprises, the government offered to waive for enterprises 27 groups of fees and charges for 12 months. New loan products and financing arrangements will also be introduced. The relief sweeteners also include fresh funding support to small and medium-sized enterprises seeking to diversify into emerging markets.
To ease the burden on residents, there are seven measures including salaries tax cuts and an extra allowance to social security, old age, disability and working family allowance recipients.
This article Hong Kong’s economy shrinks worse-than-expected 0.4 per cent in second quarter, signalling looming recession as US-China trade war and other headwinds bite first appeared on South China Morning Post