Economy Continues to Improve in Third Quarter
Hong
Kong Government Economist Helen Chan (center) presents the Third Quarter
Economic Report 2009 at a November 13 news conference. Also present were
Principal Economist Andrew Au (left) and Assistant Commissioner for Census and
Statistics Lily Ou-yang (right)
Hong Kong’s economy improved further in the third quarter, with real GDP growing 0.4% compared to the second quarter. The year-on-year decline in GDP in real terms narrowed to 2.4% in the third quarter from 3.6% in the second quarter, according to the Third Quarter Economic Report 2009, released by the Hong Kong government on November 13.
With both domestic and external sectors likely to show further improvement in the fourth quarter, GDP for 2009 as a whole is now forecast to contract 3.3% in real terms — an improvement from the forecast drop of 3.5% to 4.5% in August.
Government Economist Helen Chan said further improvement in the domestic sector offset the drag from weak external demand.
Although the global economy has entered the initial stage of recovery, import demand among advanced economies remained sluggish and continued to weigh heavily on the exports of Asian economies. Against this backdrop, Hong Kong’s merchandise exports still declined notably year-on-year in the third quarter, although the pace of decline slowed distinctly toward the end of the quarter.
Improvements in exports of services
In contrast, exports of services improved more visibly in the third quarter, supported by the further revival in financial market activities and a rebound in inbound tourism. However, trade-related service exports were still weak under the drag of sluggish trade flows.
Local consumer sentiments revived further in the third quarter as economic prospects improved, the labor market stabilized, the government’s relief measures yielded further results and asset markets remained supportive. In addition, private consumption expenditures, having fallen for four consecutive quarters, bottomed out in the third quarter on a year-on-year basis.
Business sentiments turned up distinctly, with overall investment reverting to a small increase after three consecutive quarters of double-digit declines. The labor market showed initial signs of improvement after a period of successive worsening since late 2008. The seasonally adjusted unemployment rate fell slightly to 5.3% in the third quarter, the first decline since the onset of the global financial crisis.
Because of exceptionally large stimulus measures by governments and central banks to shore up demand and stabilize financial markets, the global economy is finally expanding again. Despite this, labor markets in many advanced economies continued to worsen. These economies were still being confronted by impaired financial systems and an ongoing adjustment process to deleverage and rebuild savings.
In Asia, the rebound has been more evident, with the Mainland economy taking the lead in the return to a faster growth path. With global trade flows still notably down compared to pre-crisis levels, there have been indications in recent months that orders are gradually coming back, and the onset of a modest global recovery and the restocking process should help Hong Kong’s external trade going forward.
Domestically, local consumer sentiments should continue to be supported by an improving labor market and the cushion rendered by the government's relief measures.
Hong Kong’s third quarter real GDP grew 0.4% over the second quarter.
Uncertain global economic outlook
Although the downside risks in the external environment seem to have receded for the time being, the global economic outlook in the period ahead remains subject to considerable uncertainties. The clear risk is that the global recovery could stall after the significant fiscal boosts begin to fade out. The “toxic assets” in the U.S. and European financial systems and the deleveraging process to restore health in the banking sector are the key drags to the recovery process. Another major risk is the timing and pace of the exit strategies by governments and central banks, and the possible fluctuations in the asset markets they may cause. The potential rise in protectionist sentiment is another concern.
On inflation, both local and external price pressures are virtually absent, with local costs contained and with the supply capacity of the global economy still out-running demand by a sizable margin.
The Underlying Composite CPI fell 0.3% in the third quarter from a year earlier, but the underlying deflationary pressure stabilized toward the end of the quarter on a seasonally adjusted basis. Hence, the deflationary pressure facing the economy has been relatively contained thus far. With pricing trends in line with earlier expectations, the forecast headline and underlying consumer price inflation rates remain unchanged, at 0.5% and 0.9%, respectively, for 2009 as a whole.
HONG KONG ECONOMIC AND TRADE OFFICE IN WASHINGTON D.C.
1520 18th Street, N.W., Washington, DC 20036
Tel: (202)331-8947 Fax: (202)331-8958
To subscribe or unsubscribe, please send an e-mail to hketo@hketowashington.gov.hk
Copyright @ 2003, Hong Kong Economic and Trade Office in Washington D.C.
Hot Topics:
Useful Links:
Hong Kong Government Information Center
Hong Kong Trade Development Council