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Hong Kong’s long recession showed signs of easing in the third quarter, with a gradual improvement in domestic and external demand from an improving continental economy, a moderation of the COVID-19 pandemic, and stronger financial market activity.
The economy in the third quarter contracted 3.4 percent compared to the previous year, its fifth consecutive quarterly contraction, according to the government’s advance estimates showed yesterday.
That’s compared to a 9.0 percent year-on-year contraction in the second quarter.
Photo: Bloomberg
Activity remarkably rebounded from a slump earlier in the year as COVID-19 restrictions gradually relaxed and people returned to offices and stores.
“Looking ahead, the continued strong recovery of the mainland economy should support Hong Kong’s exports in the coming months,” a Hong Kong government spokesman said in a statement.
The government said global demand and trade flows would improve further if the recovery in major advanced economies continues, and economic activity 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 considerable recovery in the economy in the fourth quarter, barring another severe outbreak,” said Oxford Economics Chief Economist Tommy Wu (胡東安), in a research note, forecasting the territory’s GDP growth to recover to around 5 percent next year.
On a seasonally adjusted quarterly comparison basis, GDP increased 3.0 percent from the second quarter, compared with a 0.1 percent drop in the previous three months.
Economic conditions had deteriorated with a third local wave of COVID-19 infections, but pressure showed signs of stabilizing as the situation eased last month.
The territory’s economy had already been affected by often violent pro-democracy protests late last year and the trade dispute between the United States and China.
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 mainland economy and stimulus measures from the Hong Kong government.
Tourist arrivals to the territory last month fell 99.7 percent year-on-year to 9,132 interim visitors, the Hong Kong Tourism Board said, largely due to COVID-19 sidewalks.
“COVID-19 will continue to be a major downside risk to the global and local economy until effective vaccines are widely available,” said the Hong Kong government spokesman. “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 national security legislation on July 1, heralding a more authoritarian era.
The legislation, which critics say is curbing the freedoms that helped Hong Kong prosper, led Washington to revoke its special economic status for Hong Kong, which included reduced tariffs compared to the mainland.
“Evolving China-US relations, rising geopolitical tensions and the possibility of a disorderly Brexit also add to uncertainty,” the spokesman said.
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