Hong Kong Economy Shows Nearly 5% Contraction Over Third Quarter

The local economy in Hong Kong has shown an annual contraction of 4.5% in the third quarter of 2022, reported the government in an official press release. According to the Census and Statistics Department (CSD), the percentage shrinkage has been calculated based on gross domestic product (GDP) and is compared to numbers from the Q3 period of last year.

Compared to Q2 of 2022, the GDP has dropped by 2.6% in real terms, while private consumption expenditure rates remain the same. Government spend, however, has grown by 4.3%, reflecting a year-on-year trend of increased economic contraction.

Over Q2 of 2022, declines have been seen in total goods exported (15.5%) and imported (16.5%), services exported (3.5%) and imported (4%), as well as GDP fixed capital formation (14.3%).

The decline was attributed to weak external demand and disrupted trade due to issues surrounding cargo flow and cross-border lockdowns. Sharp rises in interest rates from major central banks have also contributed to slashing domestic demand. However, there is room for bounce back in improved labour market conditions and the dissemination of consumption vouchers to boost private spending.

Regarding external impact, global inflation and increased tightening of monetary policies amongst the world’s top economies are projected to lead to a lowered global demand. Rising interest rates for borrowing are also expected to reduce fixed asset investments.

The press statement concludes with hopes that the relaxed quarantine and testing measures in Hong Kong will lead to greater numbers of inbound visitors, which will improve service exports.