GDP in Hong Kong

Hong Kong - GDP

Second release confirms GDP contracted at sharpest rate in a decade in Q4

The revised GDP reading confirmed the economy contracted at the sharpest pace since June 2009 in the fourth quarter, as political turmoil continued to extinguish economic activity.

GDP tumbled 2.9% in year-on-year terms, which was unchanged from the preliminary reading, following Q3’s 2.8% contraction. Meanwhile, on a seasonally-adjusted quarter-on-quarter basis, the economy fell a revised 0.3% in Q4 (previously reported: -0.4% quarter-on-quarter), which was softer than Q3’s 3.0% contraction.

The fall in year-on-year GDP in the fourth quarter was mainly driven by a sharper fall in fixed investment, while private consumption dipped at a softer pace and government consumption growth accelerated slightly.

On the external front, exports of services contracted at a significantly sharper rate in the fourth quarter, while exports of goods declined at a weaker rate.

Looking ahead, the economy is expected to contract at an even sharper pace in the first quarter than in Q4, likely due to the coronavirus dragging on economic activity around the broader region—disrupting global supply chains and hammering tourism. Given Hong Kong’s large exposure to China, it is expected to be one of the territories most impacted by the economic fallout of the epidemic.

In late February, officials announced the 2020–2021 budget, which included cash handouts of approximately USD 1,280 to permanent residents, as well as exceptions on personal income tax on the first USD 2,670 of households’ income, in an attempt to address the impacts of the coronavirus and protests. While the stimulus was greater than markets had anticipated, the economy is still heading for another sharp contraction in 2020.

Our panel projects the economy will contract 0.7% in 2020, which is down 0.7 percentage points from last month’s forecast. Moving to 2021, the panel sees the economy growing 2.4%.