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HONG KONG (Reuters) – Hong Kong’s long recession showed signs of moderation in the third quarter, with a gradual improvement in domestic and external demand from an improving Chinese economy, a moderation of the COVID-19 outbreak and more activity. solid financial market.
The economy contracted 3.4% in July-September from a year earlier, its fifth consecutive quarterly contraction, the government’s advance estimates showed on Friday. That compared to a 9.0% year-on-year contraction in April-June.
Activity rebounded notably from a slump earlier in the year when anti-virus measures were gradually relaxed and people returned to offices and stores.
“Looking ahead, the continued strong recovery of the mainland (China) economy should support Hong Kong’s exports in the coming months,” a government spokesman said in a statement.
The government said that global demand and trade flows would improve further if the recovery in major advanced economies continues, and that economic activities should continue to recover this year if local COVID-19 infections stabilize.
“Now that the third wave of the COVID-19 outbreak in Hong Kong is behind us, we expect a significant revival of the economy in the fourth quarter, barring another severe outbreak,” said Tommy Wu, chief economist at Oxford Economics, in a note. research, forecasting the city’s GDP growth will rebound to around 5% in 2021.
On a seasonally adjusted quarter-on-quarter basis, gross domestic product (GDP) increased 3.0% from the second quarter, compared with a 0.1% drop in the previous three months.
Economic conditions had deteriorated with a third local wave of infections from the pandemic, but pressure showed signs of stabilizing as the virus situation eased in September.
“I hope that immigration policies can be relaxed for the first quarter of next year, then the economy can really start to recover,” said Samuel Tse, an economist at DBS Bank.
The world financial center’s economy had already been hit by often violent anti-government protests late last year and the trade war between the United States and China.
STRONG BOUNCE
Advance readings showed that consumption and investment remained weak in the third quarter, although economic activity likely received some support from a strong rebound in the Chinese economy and stimulus measures from the Hong Kong government.
Hong Kong’s unemployment rate rose to 6.4% in July-September, the highest in around 16 years.
Tourist arrivals to the city in September fell 99.7% from the previous year to 9,132 interim visitors, the tourism board said, largely due to COVID restrictions on visitors.
“COVID-19 will continue to be a major downside risk to the global and local economy until effective vaccines are widely available,” the government spokesman said. “The tourism industry is unlikely to see a rapid rebound with widespread travel restrictions,”
Longer term, questions are being raised about Hong Kong’s role as a financial center, after Beijing imposed a sweeping security law on the city on July 1, heralding a more authoritarian era for China’s freest city.
The law, which critics say is curbing the freedoms that helped Hong Kong prosper, led Washington to revoke its special economic status that included reduced tariffs compared to the rest of China.
The Hong Kong and Chinese authorities justify the legislation as vital to restoring stability and prosperity.
“The evolution of relations between China and the United States, the increase in geopolitical tensions and the possibility of a disorderly Brexit also increase the uncertainty,” the spokesman added.
Reporting by Twinnie Siu and Donny Kwok; Editing by James Pomfret and David Holmes and Kirsten Donovan
