Hong Kong's Third Quarter GDP Up 1.7 Percent
Hong Kong's economic growth slowed notably in the third quarter of 2008, with GDP rising 1.7 percent, after a 4.2 percent increase in the second quarter, according to the government's Third Quarter Economic Report 2008.
Merchandise exports slackened to only a modest growth in the third quarter, the worst performance since the first quarter of 2002. While the U.S. market continued to pose the main drag, exports to other markets also saw different extents of slowdown as the impact of the global downturn increasingly set in.
Hong Kong's service exports still recorded a solid growth in the third quarter, though moderated from the second quarter. This was partly affected by a temporary fall-off in inbound tourism during the Olympic Games period. But more importantly, the slow-down was due to a further deceleration in exports of financial services amid the financial market distress on a global-wide basis.
Consumption spending still remained fairly firm in July and August, but slackened distinctly in September as the U.S. financial turmoil escalated into a full-blown global financial crisis causing the local stock market to plummet markedly. For the third quarter as a whole, consumer spending recorded only a marginal growth against an exceptionally high base a year ago when consumption grew by 10.6 percent.
Overall investment spending still recorded a modest growth in the third quarter. However, in the more recent period, companies have also turned more cautious in making new investments and in hiring new hands in the wake of a highly uncertain global financial and economic environment and as credit availability was tightened amid the global credit crunch.
Along with the economic slowdown, the seasonally adjusted unemployment rate rose marginally to a still relative low level of 3.4 percent in the third quarter. The most recent figures for the September – November reveal that the unemployment rate has since risen to 3.8 percent.
Job prospects have inevitably dimmed as the near term outlook was clouded by the unsettled global financial market situation.
Headline consumer price inflation fell notably in the third quarter to 4.6 percent, mainly reflecting the favorable effects of the government's one-off relief measures.
Underlying inflation tended to stabilize after July, as the tapering in food inflation offset the enlarged increase in private housing costs. CPI inflation notched down from 6.3 percent in both July and August to 6.1 percent in September, averaging at 6.3 percent in the third quarter.
The latest tourist arrival figures indicate that Hong Kong saw 2.42 million visitors in November, down 1.1 percent year on year, bringing cumulative arrivals for the year's first 11 months to 26.7 million - up 5.3 percent on the same period last year.
Hotel occupancy across all categories of hotels in November was 88 percent, down five percentage points.
The financial turbulence, which began in August last year stemming from the U.S. sub-prime mortgage problem, erupted into a full-blown global crisis causing significant clogs to financial markets around the world. The credit crunch that ensued has added woes to the already rapidly faltering global economy.
Following a series of unprecedented measures taken by various governments and central banks in the advanced economies, there are signs that stability is gradually returning to the global financial markets. However, the credit markets remain unusually tight and would take time to return to more normal functioning. The risk of a more prolonged and protracted global economic downturn has increased.
For many advanced economies, including the U.S. and EU, a recession is already under way. The export-dependent economies in Asia would all be affected to different extents. Amid such an uncertain and difficult external environment, Hong Kong's export performance is likely to remain rather lackluster in the near term.
Domestic demand would likewise slow in the period ahead. The substantial fall-off in stock market triggered by the global-wide stock market crash and the spillover to the property market, coupled with the less promising job prospect, will continue to restrain consumers' propensity to spend. Businesses are also likely to turn more cautious in making machinery and equipment acquisitions.
Taking into account the GDP growth of 4.3 percent in the first three quarters of the year, economic growth for the year of 2008 as a whole is forecast at 3 - 3.5 percent, revised down from the earlier range forecast of 4 - 5 percent. The economy in the rest of this year is likely to be rather subdued.
With global commodity prices retreating, especially those of food and oil, and with the rebound in the U.S. dollar since July, inflationary pressures from the external front are receding.
The expected slowdown in the Hong Kong economy will also entail lesser pressures from the domestic economy. But the earlier surges in private residential rentals might continue to feed through to consumer price inflation in the coming months.
With the favorable effects of the government's relief measures continuing in the rest of the year, the forecast headline consumer price inflation for 2008 as a whole remains unchanged at 4.2 percent. Netting out the effects of government measures, the forecast underlying inflation rate for 2008 is also maintained at 5.5 percent.
Economic Analysis and Business Facilitation Unit: http://www.eabfu.gov.hk/
HONG KONG ECONOMIC AND TRADE OFFICE IN WASHINGTON D.C.
1520 18th Street, N.W., Washington, DC 20036
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Copyright @ 2003, Hong Kong Economic and Trade Office in Washington D.C.
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