Economy Contracts 9% In Q2

(To watch the full press conference with sign language interpretation, click here.)

As the COVID-19 pandemic continued to deal a heavy blow to global and local economic activities, Hong Kong's economy in the second quarter remained very weak and contracted by 9% from a year earlier, the Government announced today.

On a seasonally adjusted quarter-to-quarter comparison, real Gross Domestic Product (GDP) fell marginally by 0.1% in the second quarter.

Delivering the Half-yearly Economic Report 2020 this afternoon, Government Economist Andrew Au said that the economy showed signs of stabilisation along with the abated local epidemic situation in the latter half of the quarter. The rebound of the Mainland's economy also helped offset some downward pressures on exports of goods.

Total exports of goods dipped 2.4% in real terms despite the global recession, mainly reflecting the swift resumption of production and other economic activities in the Mainland.

Exports of services plunged further by a record 46.1% in real terms, as inbound tourism was frozen by widespread travel restrictions while cross-boundary transport and commercial services plummeted.

Private consumption expenditure recorded the steepest ever year-on-year decline of 14.2% in real terms. This came as local consumption activities were severely disrupted by the threat of COVID-19 and social distancing requirements throughout the second quarter, and outbound tourism came to a halt amid stringent travel restrictions.

Overall investment expenditure continued to tumble by 21.4% in real terms amid a negative business environment and subdued private construction activities.

The labour market continued to deteriorate in the second quarter, with the seasonally adjusted unemployment rate surged to 6.2% which was the highest in more than 15 years.

However, given the abated local epidemic situation in May and June and the cushion brought by the Employment Support Scheme, the labour market showed signs of stabilisation towards the end of the quarter.

The residential property market turned active during the second quarter, with trading activities picking up notably from a very low level in the preceding quarter and flat prices rising moderately by 2%.

The underlying and headline consumer price inflation forecasts for this year are revised downwards to 1.8% and 0.8%.

Noting that Hong Kong's short-term economic outlook is still highly uncertain, Mr Au said the real GDP growth forecast for this year is revised downwards to -6% to -8% after taking into account three important factors.

“The global economy has entered into a very deep recession in the second quarter. As I mentioned, the US economy contracted by 9.5% year-on-year in the second quarter and the euro area economy contracted by about 15% in the second quarter and the extent of contraction was somewhat larger than expected, as we refer to the International Monetary Fund forecasts.

“The second (factor) is that inbound tourism is very likely to remain frozen throughout the year and that will put a drag on our economic performance.

“The third factor to take into account is the third wave of local infections that currently has severely affected local consumption activity and also economic sentiments. So, this will also affect the performance in the third quarter.”

He added that Hong Kong's economic performance for the whole year may hopefully improve if the current wave of COVID-19 local infection can be contained within a short time, and barring any further deterioration in the external environment.