Hong Kong economic growth may plunge into negative territory by end-2019

Both domestic and external demand remained weak.

Hong Kong’s economy is likely to record a negative growth for 2019 due to contraction in the past three quarters and the lack of signs of improvement in the near term, a government spokesperson commented.

Advanced estimates released by the Census and Statistics Department (C&SD) expects gross domestic product (GDP) to decrease by 2.9% YoY in Q3 compared to a year earlier, a downturn compared to the 0.4% GDP growth recorded in Q2.

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“The Hong Kong economy will still face notable downward pressures in the rest of the year. All the establishment surveys in recent months indicated that local business sentiment has turned very pessimistic. Considering the YoY contraction of 0.7% in the first three quarters and the lack of any signs of improvement in the near term, the economy is very likely to record a negative growth for 2019 as a whole,” the spokesperson said.

On a seasonally adjusted quarterly basis, GDP shrunk 3.2% YoY in Q3.

C&SD attributed the decline of GDP to the weak performance in both domestic and external demand.

Analysed by major GDP components, private consumption expenditure recorded its first decline in more than ten years, dropping by 3.5% YoY in Q3 against the 1.3% growth in Q2.

In contrast, government consumption expenditure measured in national accounts terms grew 5.3% YoYin Q3 compared to over a year earlier, after the increase of 4% in Q2.

“As the weakening economic conditions dampened consumer sentiment, and large-scale demonstrations caused severe disruptions to the retail, catering and other consumption-related sectors, The fall in overall investment expenditure steepened amid sagging economic confidence,” a government spokesperson commented,” the spokesperson added.

Gross domestic fixed capital formation shrunk “significantly” by 16.3% YoY, compared with the decrease of 10.8% YoY in the previous quarter

Hong Kong's exports are unlikely to show any visible improvement, the spokesperson said. Total exports of goods measured in national accounts terms recorded a decrease of 7% YoY in Q3 compared with the 5.4% YoY fall in Q2. Imports of goods measured in national accounts terms fell 11.1% YoY over the same period compared with the 6.7% YoY in Q2.

Exports of services declined 13.7% YoY following the 1.1% YoY fall in Q2. Imports of services also dropped 3.8% YoY in Q3 against a 1.3% YoY rise in Q2.