The Hong Kong Census and Statistics Department just released the latest GDP estimates on Oct. 31, saying that the GDP in the third quarter fell by 4.5 percent in real terms from a year earlier, while the decline in the second quarter was 1.3 percent. The decline in GDP was mainly attributable to the weak performance of external demand during the quarter.
A government spokesperson said that the Hong Kong economy contracted at a faster rate year-on-year in the third quarter of this year. The deterioration in the external environment and the continued obstruction of cross-border land and freight traffic had dealt a severe blow to Hong Kong’s exports. Financial conditions were tightened by sharp interest rate hikes by major central banks and weighed heavily on local demand, although private consumption was supported by improving labour market conditions and the issue of consumer vouchers in August.
Analyzed by major components of GDP, private consumption expenditure remained largely unchanged in real terms compared with the same period last year, similar to the situation in the second quarter. Government expenditure increased by 4.3 percent in real terms in the third quarter compared with the same period last year, after rising by 13.0 percent in the second quarter of this year. Gross domestic fixed capital creation fell by 14.3 percent in real terms in the third quarter of this year compared with the same period last year, which was an increase on the 2.1 percent drop in the second quarter.
During the same period, the total value of exports of goods recorded a tangible decline of 15.5 percent compared with the same period of the previous year, which was worse than the decline of 8.4 percent in the second quarter. According to the definition of national accounts, imports of goods fell by 16.0 percent in real terms in the third quarter after falling by 5.9 percent in the second quarter of this year.
In the third quarter of this year, the export of services fell by 3.5 percent in real terms compared with the same period of the previous year, while it increased by 2.2 percent in the second quarter. Imports of services fell by 4.0 percent in real terms in the third quarter of this year, compared with a decrease of 2.4 percent in the second quarter.
The Census and Statistics Department pointed out that the marked deterioration of the external environment will continue to put enormous pressure on Hong Kong’s export performance for the rest of the year. High inflation and sharply tightened monetary policy in major advanced economies will further depress global demand. Geopolitical tensions and the development of the pandemic will also increase downside risks. However, the recent relaxation of the quarantine and testing arrangements for visitors to Hong Kong should help the export of services.
Locally, the largely stable pandemic situation, improving labour market conditions, and the consumer voucher programme will continue to support consumer demand. However, it should be noted these positive impacts could be more than offset by tightening financial conditions and its consequent pressure on asset prices. Rising borrowing costs will further depress fixed asset investment.
