Recession Could Get Deeper, Paul Chan Warns

Financial Secretary Paul Chan says figures out this week will confirm that Hong Kong entered recession in the third quarter of this year, and warns that the economy could get worse if society does not say no to the idea of "burning together".

Writing on his blog on Sunday, Chan said the quarter-on-quarter contraction recorded in the three months ending in June had extended into the third quarter. The initial estimate of GDP for the three months to the end of September will be published on Thursday.

Two successive quarters of contraction is the technical definition of a recession.

Without giving any figures, Chan also said that the magnitude of the contraction had increased significantly. The economy shrunk by 0.3 per cent in the second quarter when compared to the previous three months, while headline GDP growth was 0.6 percent – the same reading as in the first quarter.

Given that there are no signs of recovery, the financial secretary wrote that it would be extremely difficult to achieve an annual growth target of between zero and 1 per cent his year. He said he did not rule out the possibility that the annual GDP figure would also end in negative territory.

He said the economy had come under strain on all fronts, citing a 7.3 per cent fall in exports in September and a 50 per cent drop in tourist arrivals in the first two weeks of this month, which includes the mainland's National Day holiday week.

Chan said relief measures introduced by the government in the past few months could only ease part of the financial stress on businesses and individuals.

He said the true remedy was for all quarters in society to stop violence and to say no to the idea of "burning together".

That's a reference to the slogan "if we burn, you burn with us", adopted by the protest movement that has taken to the streets in the past four months, initially in opposition to a now-scrapped extradition bill.

Chan said the community and the economy both need to heal their wounds before they can start a new journey.