Hong Kong’s economy in the second quarter contracted 1.4% from a year earlier, the Census & Statistics Department announced today.

According to the advance estimates on gross domestic product (GDP) for the second quarter, on a seasonally adjusted quarter-to-quarter comparison, GDP rose 0.9% in real terms in the second quarter compared with the preceding quarter.

Private consumption expenditure remained virtually unchanged in real terms in the second quarter year-on-year, while government consumption expenditure grew 13%. Gross domestic fixed capital formation decreased 3%, improving from the 7.8% decrease in the first quarter.

Over the same period, total goods exports recorded a decline of 8.6% and goods imports decreased by 6.2%. Exports of services rose 1.8% while imports of services decreased 0.7%.

The Government said Hong Kong economy improved in the second quarter, but the extent of improvement was smaller than expected.

As the local epidemic situation generally improved and the social distancing measures were relaxed in tandem, and aided by the Government's various support measures, there was some revival in domestic activities, but the recent increase in the number of COVID-19 cases and tightened financial conditions have constrained the momentum in the latter part of the quarter.

Externally, weakened global demand and continued disruptions to cross-boundary land cargo flows between the Mainland and Hong Kong weighed heavily on Hong Kong's exports.

Looking ahead, worsening global economic prospects will continue to weigh on Hong Kong's export performance in the remainder of the year.

Elevated inflation in the advanced economies amid supply-side disruptions and persistent tension in Ukraine, and the stepping up of monetary policy tightening by many major central banks are expected to dampen economic growth significantly.

While the Mainland economy should revive further, it may not be able to fully offset the deterioration in the advanced economies. Nonetheless, if cross-boundary land transportation between the Mainland and Hong Kong continues to improve, our external trade may get some relief.

Domestically, economic activities are likely to show further revival in the rest of the year, but the extent will depend on how the local epidemic evolves and how the tighter financial conditions affect consumer spending power and sentiment. The Consumption Voucher Scheme and other government support measures should continue to support demand.