Hong Kong slips into recession as economy shrinks 3.2 per cent in the third quarter
- The decline between July and September followed a 0.4 per cent drop in the second quarter, marking a fall in two consecutive quarters
- Tourist arrivals in Hong Kong also declined 50 per cent year on year in the first half of October
The decline between July and September followed a 0.4 per cent drop in the second quarter, marking a fall in two consecutive quarters, the Census and Statistics Department revealed on Thursday.
The preliminary gross domestic product (GDP) shrank 2.9 per cent in the third quarter year on year, the slowest in a decade.
“The figure is alarming and is far worse than what I had initially expected – a 0-1 per cent fall,” ING Bank Greater China economist Iris Pang said.
“The economic situation will worsen as a bad cycle is forming from lay-offs of staff from restaurants, shops and trading companies, which will in turn hurt consumer spending and fuel more lay-offs.”
In the first nine months of this year, the GDP declined 0.7 per cent, which led to Chief Executive Carrie Lam Cheng Yuet-ngor issuing a warning recently of a possible full-year contraction in 2019 or worse than the government’s forecast of growth anywhere between 0 and 1 per cent.
A government spokesman said the city’s economic growth moderated progressively since last year despite the trade war, and that the situation deteriorated abruptly due to what he called “severe impacts of the local social incidents”.
Fresh data on Thursday showed the number of tourists visiting Hong Kong plunged 34.2 per cent in September year on year largely because of the protests.
The number of short-haul non-mainland China travellers – including those from Taiwan, South Korea, Japan, Malaysia and Singapore – recorded the deepest decline, at 35.5 per cent, while mainland China visitor numbers plunged 35 per cent.
In the first nine-months of this year, Hong Kong tourist arrivals grew 0.2 per cent to 46.76 million from the same period last year.
But the double whammy of the trade war and the ongoing protests has left two of the city’s four key industries – tourism and logistics – struggling to stay afloat.
“We are in a big trouble,” Joe Chau Kwok-ming, president of the Hong Kong General Chamber of Small and Medium Business, said.
“The prospects of our members in the trade business will depend on whether [US President] Donald Trump and [Chinese President] Xi Jinping will seal a deal in November to resolve the trade war, while the prospects of our members in the retail and restaurant business have been aggravated by domestic issues. It is hard to remain positive about our prospects in the near term.”
Chau added that many small firms were already suffering from cash flow problems.
The government has rolled out relief measures worth more than HK$21 billion in the past three months to counter economic woes. The measures, together with sweeteners offered in its budget earlier this year, are expected to boost the GDP by 2 per cent in the coming year.
However, Pang also remained pessimistic about the economic prospects that lie ahead in 2020. She forecast a 5.8 per cent decrease in GDP for next year, and an estimated 1.7 per cent drop this year.
“I cannot see any light at the end of the tunnel yet,” she said of the prospects of an end to violent demonstrations.
“I dare not go out even for a hotpot dinner.”
She added that pressure was mounting on the government to announce a new wave of relief measures for the people at the grass-roots level, various trading companies and the unemployed.
To ease the funds crunch of the small firms, the Federation of Hong Kong Industries, one of the city’s largest business bodies, urged banks to allow companies to repay interests on borrowings without principal amount for only 12 months. It also urged the government to offer more subsidies – such as on electricity, gas and water bills – to lower operational costs.
Hong Kong’s unemployment rate stood at 2.9 per cent in the third quarter, the highest since the first quarter of 2018. The city’s exports also slid 7 per cent between July and September from the same period last year.