Hong Kong’s GDP grinds to near halt at dismal 0.5 per cent growth

Hong Kong’s economy has grown at its slowest quarterly rate in nearly a decade, reduced to a near standstill by weak consumer demand and shock waves from the US-China trade war, but the situation is expected to improve in the near future.

Releasing advance estimates for the first time, the city on Thursday reported a 0.5 per cent increase in gross domestic product for the first quarter, the smallest increase since the third quarter of 2009.

The weak milestone continues a worrying trend, also affected by cooling property prices and volatile stock markets, with the economy growing at a sluggish 1.2 per cent pace in the fourth quarter of last year.

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“The real GDP growth eased to 0.5 per cent in the first quarter of 2019 on a year-on-year basis, weighed down by the weaker performance of the global economy and various external headwinds,” a government spokesman said. “The modest year-on-year growth in the first quarter also reflected the high base of comparison in the same quarter of last year, when the economy grew strongly by 4.6 per cent.”

The government also noted that GDP grew 1.2 per cent in real terms in the first quarter of 2019, compared with the fourth quarter of 2018.

Financial Secretary Paul Chan Mo-po had estimated the city’s economy would grow by 2 to 3 per cent this year when he announced the annual budget in February. Last year the full-year figure was 3 per cent.

Chan warned on Sunday that the city’s first-quarter GDP could not escape the impact of the trade war or the weak manufacturing and trade numbers reported in most Asian economies over the same period.

According to Thursday’s estimates, total exports of goods recorded a decrease of 4.2 per cent in real terms for the first quarter over the same period last year. Exports of services rose by 1.4 per cent.

Private consumption expenditure performed even worse, with just 0.1 per cent growth – contrasting sharply with 2.7 per cent growth in the last quarter of 2018.

“Overall investment expenditure contracted as business sentiment has turned cautious since the latter part of last year,” the spokesman said, but noted that the sustained expansion of inbound tourism continued to provide support.

Chinese University associate professor of economics Terence Chong Tai-leung said he had expected the overall growth estimate would be low because of the gloomy local economic scene, as well as stock and property market troubles, from late last year to February.

But he was optimistic that growth in the second quarter could jump to at least 2 per cent based in part on improvements in the stock and property markets in March and April.

“Basically, the figure this quarter should hit the lowest point ... [Taking into account last year’s lower base figures] and the current economic recovery, the figures will continue to rise this year,” he said.

Economist Andy Kwan Cheuk-chiu, director of the ACE Centre for Business and Economic Research, agreed the estimate for the first quarter had almost hit the bottom for this year, and there should be an improvement in the following quarters.

Danny Lau Tat-pong, honorary chairman of the Hong Kong Small and Medium Enterprises Association, attributed the weaker growth to the ongoing trade war.

He predicted exports in the second quarter would also perform poorly, as the value of received orders involving the US market had dropped in the first quarter.

Even if the tariff dispute were to be resolved by as early as next week and prompted companies to resume orders, the goods could only be exported in the third quarter, he said.

The government will announce Hong Kong’s actual GDP figures on May 17.