Economy contracts 2.9% in Q3

November 15, 2019

Government Economist Andrew Au:
The Hong Kong economy saw an abrupt deterioration in the third quarter. After growing mildly by 0.4% year-on-year in the second quarter, the economy contracted by 2.9% in the third quarter. This was the first year-on-year contraction since the recession in 2009. Quarter-to-quarter, after seasonal adjustment, real GDP contracted significantly by 3.2%, the second decline in a row, indicating that the economy has already entered a recession. As the external environment will still be difficult, Hong Kong’s export performance is expected to remain weak in the rest of this year. Domestically, the local social incidents with intensifying violence in the past few months have kept visitors away, taken a heavy toll on consumption demand, and seriously dampened investment sentiment. The latest surveys all showed that local business sentiment has turned very pessimistic. As the impacts of the local social incidents have yet to show signs of abating - in fact in the recent past week, the impacts may have even increased further - consumption and investment demand will likely remain in the doldrums for the rest of the year. Taking into account the actual outturn of a 0.6% contraction in the first three quarters of the year and the persistent notable downward pressures, the real GDP growth forecast for 2019 as a whole is revised downwards to -1.3%.

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Hong Kong’s economy contracted by 2.9% in the third quarter from a year earlier, marking its first year-on-year decline since the recession of 2009.

Delivering the Third Quarter Economic Report 2019 today, Government Economist Andrew Au said Hong Kong’s economy saw an abrupt deterioration in the third quarter.

“On a seasonally adjusted quarter-to-quarter comparison, real GDP decreased significantly by 3.2% in the third quarter after a 0.5% decline in the second quarter,” Mr Au said.

He added that with two consecutive quarters of contraction, the economy had already entered a recession.

Due to slackening global demand and escalated US-Mainland trade tensions, the total exports of goods registered an enlarged year-on-year decline of 7.1% in real terms in the third quarter.

As the external environment will still be difficult, Hong Kong’s export performance is expected to remain weak the rest of this year.

"The local social incidents with intensifying violence in the past few months have kept visitors away, taken a heavy toll on consumption demand, and seriously dampened investment sentiment.”

Private consumption expenditure weakened sharply and fell by 3.4% in real terms, its first year-on-year decline in more than 10 years.

The residential property market likewise softened, with a drop of 3% in flat prices during the quarter amid thinner trading.

The decline in overall investment expenditure steepened to 16.3% in the third quarter.

Mr Au pointed out that the latest surveys all indicated that local business sentiment has turned very pessimistic.

“As the impacts of the local social incidents have yet to show signs of abating, consumption and investment demand will likely remain in the doldrums for the rest of the year.

“Considering the actual outturn of a 0.6% contraction in the first three quarters of 2019 and the persistent notable downward pressures, the real GDP growth forecast for the year as a whole is revised downwards to -1.3%.”