Hong Kong’s economy deteriorated worse than market expectations due to continued weaknesses in both domestic and external demand as the COVID-19 pandemic continued to severely damp global and local economic activity.
According to the advance estimates released by the Census and Statistics Department on Wednesday, the city’s gross domestic product decreased by 9 percent in real terms in the second quarter from a year earlier, compared with a decrease of 9.1 percent in the first quarter. The decline in GDP was mainly attributable to the continued weak performance in both domestic and external demand. Market consensus held that the city’s economic growth would decline 8.3 percent in the quarter.
According to the advance estimates released by the Census and Statistics Department on Wednesday, the city’s gross domestic product decreased by 9 percent in real terms in the second quarter from a year earlier, compared with a decrease of 9.1 percent in the first quarter
Private consumption expenditure, gross domestic fixed capital formation, and total exports of goods posted a year-on-year decrease of 14.5 percent, 20.6 percent and 2.1 percent, respectively.
Exports of services fell by 46.6 percent from a year earlier, with inbound tourism remaining at a standstill.
On the other hand, government consumption expenditure registered an annual gain of 9.6 percent in the same period.
On a seasonally adjusted quarter-to-quarter comparison basis, GDP decreased marginally by 0.1 percent in real terms in the second quarter compared with the first quarter.
“Looking ahead, the COVID-19 pandemic will remain a key threat to the global economic outlook,” a government spokesman cautioned in a press statement on Wednesday. “While the US and the euro area economies seem to have gotten out of their troughs, their recovery paths could be slow and bumpy until an effective vaccine or treatment is found.
“The evolving China-US relations and heightened geopolitical tensions also add to uncertainties,” the statement read. “Thus the challenging external environment will likely constrain Hong Kong's export performance in the near term. Locally, the recent surge in COVID-19 cases has clouded the near-term outlook for domestic economic activity.”
“The strict measures are likely to disrupt economic activities again and pose renewed downward pressure on the already hard-hit sectors,” OCBC Wing Hang Bank economist Carie Li warned. “We expect the government to step up efforts by rolling out more relief measures in the near term.”
Local consumption was severely disrupted by the threat of COVID-19 and social distancing requirements throughout the quarter, while tourism came to a halt amid stringent travel restrictions. The sharp deterioration of labor market conditions also added strains on consumer sentiment. Overall investment expenditure continued to tumble amid the austere business environment and a highly uncertain economic outlook.
