Hong Kong's economy shrank by 8.9 per cent in the first three months of this year, the steepest decline on record since 1974, advanced estimates released yesterday showed.
Gross domestic product (GDP) fell markedly by 5.3 per cent on a quarter-to-quarter basis, also the steepest drop on record.
The sharp contraction was driven by "the continued weak performance in both domestic and external demand, as affected by the Covid-19 pandemic", said the government.
Financial Secretary Paul Chan yesterday said Hong Kong's economy has been contracting for four straight quarters now - similar to its situation during the global financial crisis in 2008. During the Asian financial crisis in 1998, the economy shrank for five consecutive quarters.
"Although locally, the epidemic situation seems to be under control but the external environment is still very challenging.
"Globally, the epidemic is yet to be put under complete control, that will affect our exports, that will also affect international travelling and business investment," Mr Chan said, adding that even if there was a recovery in the second quarter, it would be "gradual and small".
Last Wednesday, Mr Chan announced that this year's growth forecast was revised to minus 4 per cent to minus 7 per cent.
Private consumption expenditure fell 10.2 per cent in the first quarter from a year earlier as social distancing measures brought consumption-related activities to a new low, while the government said austere labour market conditions dealt a heavy blow to consumer sentiment.
Total exports clocked a year-on-year fall of 9.7 per cent in the same period. Exports of services posted the biggest fall for a single quarter on record, at 37.8 per cent, partly reflecting the drastic setback in inbound tourism. Imports of services decreased by 25.4 per cent year-on-year.
Overall investment expenditure also suffered a sharp contraction amid pessimistic business sentiment and sluggish construction activity.
Relief measures of unprecedented scale, including two rounds of stimulus under the Anti-epidemic Fund and the massive package of counter-cyclical measures in the 2020-21 budget, are expected to cushion the economy and the labour market.
But in the near term, Hong Kong's exports will remain under much pressure, given the uncertainties.
"Besides, the developments in US-mainland (China) economic and trade relations, geopolitical tensions and global financial market volatility continue to warrant attention," the government said.
Hong Kong shares ended yesterday at 23,613.80, after clocking losses of 4.2 per cent, or 1,029.79 points, on fears of a renewed China-United States trade war after US President Donald Trump hit out at Beijing over its handling of the coronavirus outbreak.
