This undated photo shows people wearing face masks walking on a street in Hong Kong. (ROY LIU / BLOOMBERG)

Hong Kong’s economy showed the first signs of emerging from a crippling recession sparked by social unrest last year and deepened by the COVID-19 pandemic.

Gross domestic product (GDP) declined 3.4 percent in the third quarter from a year earlier, the government said in a statement Friday. The median estimate in a Bloomberg survey of economists was for a 5.6 percent contraction. On a quarter-on-quarter basis, GDP rose 3 percent.

It was the first time the quarter-on-quarter measure has risen since before the start of anti-government protests stemming from the extradition bill last year, as a third wave of virus infections subsided last month

This marks the first time the quarter-on-quarter measure has risen since before the start of anti-government protests stemming from the extradition bill incident last year, as a third wave of virus infections subsided last month. 

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The moderation in the decline in year-on-year GDP stems in part from a low base of comparison as well as factors including a reviving economy on the mainland, stabilization of the virus in Hong Kong and stronger financial market activity, the government said.

“Looking ahead, the continued solid recovery of the mainland economy should render support to Hong Kong’s exports in the coming few months,” reads the statement. “Also, global demand and trade flows will further improve if the recovery of the major advanced economies sustains.”

Nascent recovery

Still, the recovery is nascent and Hong Kong will need more robust commerce and tourism to sustain a return to economic growth, economists say. Revised figures on GDP and more detailed statistics will be released Nov 13.

Hong Kong is among other economies in Asia including Singapore and South Korea that are starting to recover from months of anti-virus measures. 

Looking ahead, the continued solid recovery of the mainland economy should render support to Hong Kong’s exports in the coming few months.

Hong Kong government

READ MORE: HK exports up 9.1% in Sept on recovering mainland market

Hong Kong and Singapore have announced plans to create a travel bubble between the two cities that is targeted to launch next month, Chief Executive Carrie Lam Cheng Yuet-ngor said at a press briefing. People in both cities would be exempted from compulsory quarantine, replaced by coronavirus testing. The pact joins efforts in several markets in the region to loosen travel restrictions.

In an Oct 25 blog post Financial Secretary Paul Chan Mo-po said if the flow of people and commerce between Hong Kong and the mainland is safely restored, the city can be “revitalized substantially” even if the global economy remains constrained.

‘Main force’

“The sustained rapid economic recovery in the mainland can be said to be the main force supporting the Hong Kong economy,” Chan said. “Only by effectively controlling the epidemic and thoroughly cleaning up local infection cases can we truly create an environment conducive to economic recovery.”

The government is pursuing a law that would make COVID-19 tests mandatory for some groups even as it slowly eases virus-related restrictions, Lam said at the briefing. Hong Kong is ready to reopen the border with the mainland from a technical perspective, but it requires mutual consent, she said.

READ MORE: CE: No quarantine for mainland-based HK residents starting Nov

Meanwhile, Hong Kong’s efforts to stimulate the economy remain under scrutiny. The city has announced more than HK$310 billion (US$40 billion) in relief this year, yet the prolonged recession has led to shuttered storefronts and unemployment at an almost 16-year high of 6.4 percent as of September. Joblessness is likely to rise further after Cathay Pacific Airways Ltd last week said it will slash more than 5,000 jobs and close a regional carrier.