Vehicles travel on a highway near the Kwai Tsing Container Terminal at night in Hong Kong, Sept 16, 2020. (PHOTO/BLOOMBERG)
HONG KONG - Hong Kong’s economy is expected to shrink 6.1 percent this year — revised from a projection in August of a 6 to 8 percent contraction — as the COVID-19 pandemic continues to batter the city’s economic and social life.
The forecast is based on the actual output in the first three months of the year, the slight improvement in the third quarter, and the cushioning effects of the government’s massive relief measures, the SAR government said on Friday.
Government economist Andrew Au Sik-hung said the latest forecast for full-year GDP growth was made on the assumption that there will be neither another wave of COVID-19 infections nor a further sharp deterioration in global economic activity.
Government economist Andrew Au Sik-hung believes that if local infections can be contained and the pandemic situation can remain stable, the city’s economy is likely to see further modest improvement in the fourth quarter of this year
“In our forecast, we expect the situation will remain stable. But if there’s a fourth wave of infections, the actual outturn could be worse than our current forecast,” Au said.
READ MORE: HK jobless rate jumps to 6.4%, highest in nearly 16 years
The latest economic forecasts by private sector analysts mostly range from -5.7 to -8 percent, averaging around -6.8 percent.
Au believes that if local infections can be contained and the pandemic situation can remain stable, the city’s economy is likely to see further modest improvement in the fourth quarter of this year.
Hong Kong’s economic recession showed signs of easing in the third quarter, slumping 3.5 percent compared with the same period a year ago. The projection is narrower than the 9 percent year-on-year contraction in the second quarter.
On a seasonally adjusted quarter-to-quarter comparison, the economy rebounded 2.8 percent in the third quarter, ending the run of quarterly declines in the preceding five quarters.
Au attributed the slight improvement in the third quarter to the better external trading environment, increasing domestic demand, and stronger financial market activity.
Total exports of goods grew moderately by 3.9 percent in real terms year-on-year in the third quarter, following the 2.2 percent decline in the second quarter. Exports to the mainland continued to stage a strong growth, and those to the United States and the European Union showed narrowed declines. The growth reflects the gradual recovery of the global economy led by the Chinese mainland.
ALSO READ: CE warns Hong Kong's recession will last 'long time'
Meanwhile, exports of financial services saw further growth, fueled by active cross-border financial and fundraising activities. IPO proceeds in Hong Kong grew 60 percent year-on-year in the third quarter, with mainland internet giants JD and NetEase raising $4.5 billion and $3.1 billion respectively.
Domestic demand has also improved somewhat, although it remained weak. Private consumption expenditures posted a smaller year-on-year decline of 8.2 percent in real terms in the third quarter, as local consumption sentiment revived somewhat in the latter part of the quarter when the third wave of local COVID-19 infections was contained.
However, the labor market was still and will remain under great pressure. The seasonally adjusted unemployment rate rose 6.4 percent in the third quarter, the highest in nearly 16 years.
The market worries the unemployment rate will continue to go up, given that Hong Kong flagship carrier Cathay Pacific announced in late October that it was laying off 6,000 employees. Meanwhile, the distribution of the second tranche of the wage subsidies provided by the government’s Employment Support Scheme is about to end late this month.
Au said the government will continue to closely monitor the situation and roll out measures as necessary to maintain the vitality of the economy and pave the way for a speedy recovery.
