Hong Kong: Economy continues to recover in Q4
GDP contracted at a milder rate of 3.0% year-on-year in the fourth quarter, after falling 3.6% in the third quarter. Q4’s reading marked the joint-best result since Q4 2019. Taking the year as a whole, the economy shrank 6.1% in 2020 (2019: -1.2%), marking the sharpest contraction since the current series began in 1990.
Q4’s upturn reflected improvements in private consumption, fixed investment and exports compared to the previous period. Household spending fell 7.6% in the fourth quarter, which was softer than the third quarter’s 8.2% contraction. Notably, fixed investment rebounded in Q4, growing 2.6% and marking the first expansion since Q3 2018—contrasting the 10.9% drop recorded in the previous quarter. Public consumption, meanwhile, grew at a slightly softer pace of 5.6% in Q4 (Q3: +7.1% yoy).
Exports of services slid at a slower pace of 29.6% year-on-year in Q4 (Q3: -33.5% yoy). In addition, imports of services dropped at a slightly softer rate of 35.9% in Q4 (Q3: -36.0% yoy).
On a seasonally-adjusted quarter-on-quarter basis, economic growth slowed to 0.2% in Q4, contrasting the previous period’s 2.7% rise.
Commenting on the state of the economy in 2021, Lisheng Wang, Jing Wang and Ting Lu, economists at Nomura, noted:
“Considering the government’s escalated efforts, by imposing sudden lockdowns and mandatory testing to small areas in a short period of time, in addition to the expected arrival of vaccines in late February, we believe the fourth wave of virus may be contained soon and thus Hong Kong’s economy could be reopened further, resulting in higher GDP growth in coming months. […] However, we believe the domestic recovery will be gradual and bumpy, as the virus situation in major overseas economies is still concerning, domestic job market conditions remain subdued and some social-distancing requirements and travel bans will likely extend further into H1.”