Economy Contracts 3.5% In Q3

(To watch the full press conference with sign language interpretation, click here.)

Hong Kong’s economy in the third quarter contracted by 3.5% from a year earlier, a marked improvement from the 9% contraction in the second quarter, the Government announced today.

On a seasonally adjusted quarter-to-quarter comparison, real gross domestic product (GDP) rebounded by 2.8% in the third quarter, arresting the declines in the preceding five quarters.

Delivering the Third Quarter Economic Report 2020 this afternoon, Government Economist Andrew Au said that the economy saw some improvement in the third quarter, thanks to an improved external trading environment amid the accelerated growth of the Mainland economy.

The improvement was also attributed to the stabilised local epidemic situation in the quarter’s latter part, and stronger financial market activity.

Total exports of goods resumed moderate year-on-year growth of 3.9% in real terms, mainly underpinned by the sharp pick-up in September along with the recovery of import demand in major markets.

Exports of services plummeted further by 34.6% in real terms as inbound tourism remained at a standstill and cross-boundary transport and business services stayed sluggish.

Private consumption expenditure posted a year-on-year decline of 8.2% in real terms, as local consumption sentiment revived in the latter part of the quarter when the third wave of COVID-19 infections was contained.

Overall investment expenditure continued to fall visibly by 11.1% in real terms amid a difficult business environment and weak construction activity.

The labour market deteriorated in the third quarter as a whole, with the seasonally adjusted unemployment rate going up to 6.4%, the highest in close to 16 years.

However, the pressure faced by the labour market showed signs of stabilisation towards the quarter’s end as the local epidemic situation abated in September.

The residential property market showed some revival in the latter part of the quarter, with trading activities recording a mild decline from the preceding quarter and flat prices edging down by 1%.

The underlying and headline consumer price inflation forecasts for this year are revised downwards to 1.3% and 0.3%.

Mr Au said Hong Kong’s economy may experience a modest improvement.

“If the local epidemic situation remains stable and if there is no abrupt relapse in global economic activity, the Hong Kong economy is likely to see some further modest improvement in the fourth quarter.

“Taken into account the actual outturn in the first three quarters and the support measures provided by the Government so far, the Hong Kong economy is projected to contract by 6.1% for this year as a whole. This will be the largest annual decline of our real GDP on record.”

He added that the Government will continue to closely monitor the situation and introduce necessary measures to support economic recovery.