HONG KONG (BLOOMBERG) - Hong Kong’s economy showed the first signs of emerging from a crippling recession sparked by political unrest last year and deepened by the global pandemic.
Gross domestic product (GDP) declined 3.4 per cent in the third quarter from a year earlier, the government said in a statement on Friday (Oct 30), better than the median estimate of a 5.6 per cent contraction in a Bloomberg survey of economists. On a quarter-on-quarter basis, GDP rose 3 per cent.
This marks the first time the quarter-on-quarter measure has risen since before the start of anti-government protests last year, as a third wave of virus infections subsided last month. The economy has been in its longest recession since the tumultuous period from 1997 to 1998 that included the handover to China and the Asia financial crisis.
The moderation in the decline in year-on-year GDP stems in part from a low base of comparison as well as factors including a reviving mainland China economy, stabilization of the virus in Hong Kong and stronger financial market activity, the government said.
“Looking ahead, the continued solid recovery of the mainland economy should render support to Hong Kong’s exports in the coming few months,” the report said. “Also, global demand and trade flows will further improve if the recovery of the major advanced economies sustains.”
Still, the recovery is nascent and Hong Kong will need more robust commerce and tourism to sustain a return to economic growth, economists say. Revised figures on GDP and more detailed statistics will be released on Nov 13.
“Hong Kong needs to see its border reopening with mainland China before the city can benefit from the rapid recovery there,” Tommy Wu, senior economist with Oxford Economics in Hong Kong, said before the data was released.
Hong Kong is among other economies in Asia including Singapore and South Korea that are starting to recover from months of anti-virus measures. Taiwan also reported growth figures Friday, which showed the economy strongly rebounding in the third quarter after bringing the Covid-19 pandemic under control and benefiting from a technology boom.
Hong Kong and Singapore have announced plans to create a travel bubble between the two cities that is targeted to launch next month, Chief Executive Carrie Lam said at a press briefing. People in both cities would be exempted from compulsory quarantine, replaced by coronavirus testing. The pact joins efforts in several markets in the region to loosen travel restrictions.
In an Oct 25 blog post Financial Secretary Paul Chan said if the flow of people and commerce between Hong Kong and mainland China is safely restored, the city can be “revitalized substantially” even if the global economy remains constrained.
“The sustained rapid economic recovery in the mainland can be said to be the main force supporting the Hong Kong economy,” Mr Chan said. “Only by effectively controlling the epidemic and thoroughly cleaning up local infection cases can we truly create an environment conducive to economic recovery.”
The government is pursuing a law that would make Covid-19 tests mandatory for some groups even as it slowly eases virus-related restrictions, Ms Lam said at the briefing. Hong Kong is ready to re-open the border with China from a technical perspective, but it requires mutual consent, she said.
Meanwhile, Hong Kong’s efforts to stimulate the economy remain under scrutiny. The city has announced more than HK$310 billion (S$54.6 billion) in relief this year, yet the prolonged recession has led to shuttered storefronts and unemployment at an almost 16-year high of 6.4 per cent as of September.
Joblessness is likely to rise further after Cathay Pacific Airways last week said it will slash more than 5,000 jobs and close a regional carrier.