Hong Kong sinks into recession

GDP slumped 3.2% into region’s worst performance since the 2009 global financial crisis.

Hong Kong’s economy has fallen into a “deep depression” in Q3 as the gross domestic product (GDP) slumped 3.2% QoQ in Q3, and is expected to contract further in Q4 amidst ongoing political and trade issues, according to Oxford Economics.

This is the region’s worst performance since the 2009 global financial crisis, Oxford Economics said.

Domestic demand was badly dented by the ongoing protests, now in its fifth month. Further weighing in is, weak global trade and trade tensions, which took a heavy toll on Hong Kong’s external demand. On a yearly basis, GDP fell 2.9% YoY, compared to 0.4% YoY growth in Q2.

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

GDP is expected to shrink 1.5% for the whole of 2019, and will be followed by another decline in 2020 as both domestic and external economic pressures persist.

In Q3, Private consumption contracted 3.5% YoY, whilst capital investment plunged 16.3% YoY, its fourth consecutive quarter of decline. Government spending was the only bright spot, growing 5.3% y/y. Meanwhile, exports contracted 8% YoY, but the stronger fall in imports of 10.3% YoY meant that net exports again were the main contributor to growth.

“Looking ahead, we expect the economy to contract further, as there is no end to the protests in sight. Retail sales and tourist-related sectors are experiencing their worst performance in over a decade and will remain under huge strain until the political unrest eventually ends. Meanwhile, exports will continue to be weighed down by tepid global trade and the US-China trade war,” commented Tommy Wu, senior economist for Oxford Economics.

“The government has rolled out stimulus measures since August. But the scale of the packages has been small and, given how poor sentiment is, we do not expect the stimulus to have a meaningful impact until the political unrest comes to a halt,” he added.