HK just avoids recession, but exports down
Dennis Chong and Martin Wong
Hong Kong narrowly escaped a recession, with its economy growing 0.1 per cent in the third quarter from the previous three months.
Low unemployment and continued growth in visitors from the mainland meant consumption held up, but the euro-zone debt crisis dragged exports down.
Compared with a year ago, the economy grew 4.3 per cent year on year, down from a revised 5.3 per cent in the second quarter.
The government warned that global economic uncertainty could worsen in the near term and that growth could remain subdued. Meanwhile, inflation is expected to peak in the fourth quarter, with rents and food prices stabilising.
'The macro risk ahead of us has shifted from inflation to the growth outlook,' Government Economist Helen Chan told a news conference.
Output between April and June contracted by 0.4 per cent from the first quarter, and a further contraction from July to September would have sent Hong Kong into recession. (A technical recession occurs when quarter-on-quarter growth contracts for six months.)
Chief Executive Donald Tsang Yam-kuen said this week that Hong Kong would not be exempt from a global crisis and that there could be a few quarters of 'bad times', although a full-year recession was unlikely.
Tsang said economic growth could shrink to as little as 2 per cent next year.
Chan painted a dim short-term picture yesterday.
'In an increasingly difficult global environment and [with the] highly uncertain situation now in the euro-zone sovereign debt crisis, our economic growth will be rather subdued in the near term,' she said. The risks could intensify in the next few months and linger into the next year.
That the economy avoided sinking into recession was down to a number of factors, the government said. Strong private consumption, boosted by tourism, and investment had offset a fall in exports.
Goods exports contracted by 2.2 per cent year on year, the first such fall since late 2009, but private consumption expenditure was up 8.8 per cent year on year. The growth in consumption was fuelled by rising earnings and a by a 13-year low for unemployment - just 3.2 per cent of the workforce was out of a job. Chan warned that export performance would remain lacklustre.
(Almost all Hong Kong's goods exports are re-exports of mainland-produced goods, and mainland factories report declining orders as they struggle with rising costs and shrinking demand in the West.)
The government forecast economic growth for the full year of 5 per cent - at the bottom end of its earlier forecast of 5 per cent to 6 per cent.
Meanwhile, underlying inflation rose by 6.1 per cent year on year in the third quarter, up from 5 per cent in the last quarter. Chan forecast full-year underlying inflation of 5.3 per cent, down 0.2 per cent from earlier estimates, and said she expected inflation to peak in the current quarter. Property prices fell by 2 per cent in the third quarter, the first fall since the fourth quarter of 2008. Transactions plunged 41 per cent.
Secretary for Labour and Welfare Matthew Cheung Kin-chung said the job market could come under pressure but, pointing to the robust consumption growth, said: 'We believe the unemployment rate will not rise too fast in the short term,'
Following HSBC's announcement in September that it plans to lay off 3,000 staff in Hong Kong, the Labour Department set up a hotline for people made redundant. The bank this week said those staff would be redeployed, not fired.