Puts a bit of a crimp in the tourism industry: Riot police officers in Hong Kong. Photo: AFP /Jimmy Lau / EYEPRESS

The embattled city of Hong Kong confirmed that its economy contracted for the second straight quarter in the three months to September – defined by economists as a recession, –  as months of anti-government protests and violence took their toll.

The government also recorded a downward revision of GDP for the year as a whole, the first annual contraction in a decade.

On Friday the government released data that showed the economy had shrunk by 3.2% in July-Sept which came on the back of the 0.5% contraction in the April-June period. This confirmed the interim data released in October.

In year on year terms, GDP shrank 2.9% in Q3, worsening from a contraction of 0.4% in the preceding quarter. This marked a GDP contraction of 0.6% in the year to date from 2018.

Source: Hong Kong Census and Statistics Department

“The Hong Kong economy saw an abrupt deterioration in the third quarter of 2019, as the local social incidents dealt a very severe blow to an economy already weakened by a synchronized global economic slowdown and US-Mainland trade tensions,” said Hong Kong Government Economist Andrew Au.

Exports of goods fell 7.1% due to poor global demand and rising US-China trade tensions and service exports plunged by 13.8%, the biggest year-on-year fall since the second quarter of 2003, as tourism suffered from the violence and disturbances in the city. Retail sales volume declined by 22.9% year-on-year in August and September combined, the largest on record for a two-month period

“Retail sales have been hurt severely, not just because of contraction in tourism activities but also due to worsening job security of local people,” said Iris Pang, Greater China economist at ING. “It is very difficult to see how the government will put an end to this violence.”

Indeed, the government also has a pessimistic view, having slashed its GDP forecast for the year to -1.3% from the 0-1% forecast made in August, making it the first annual contraction since 2009. In May, it had forecast GDP would grow by 2-3% in 2019, the month before the protests began.

The five-month-old protests have paralyzed parts of the city and affected business conditions and could indeed force the government to lend economic support.

“Ending violence and restoring calm are pivotal to the recovery of the economy. The Government will continue to closely monitor the situation and introduce measures as necessary to support enterprises and safeguard jobs,” said Au.

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