HONG KONG, Nov 11 (Reuters) – Hong Kong’s economy contracted 4.5% in the third quarter from a year earlier, advanced government data showed on Friday, weighed down by rising interest rates. global interest and falling trade.
It was the third consecutive quarter of year-on-year contraction in the Asian financial hub’s gross domestic product (GDP) and the worst contraction since the second quarter of 2020.
The decline deepened, falling from 1.3% in the second quarter. The government also lowered its full-year growth forecast to minus 3.2% from 0.5% to minus 0.5%, citing a deterioration in global growth prospects.
“Going forward, the marked deterioration in the external environment will continue to exert immense pressure on Hong Kong’s export performance,” a government spokesperson said in a statement, adding that geopolitical tensions and uncertainties regarding COVID-19 will add downside risks.
“The relaxation of testing and quarantine arrangements for incoming visitors should provide some support for service exports,” the spokesperson said.
On a quarterly basis, the economy contracted by a seasonally adjusted 2.6% in the July-September period.
While Hong Kong has eased social distancing measures put in place to curb COVID-19 infections, the border with mainland China has been largely closed since the start of 2020, stifling mainland tourism spending, a key driver consumption growth.
The city also faces headwinds from strong inflationary pressure and aggressive monetary tightening in advanced economies.
Cases of negative equity in Hong Kong residential mortgages increased nearly ninefold in the third quarter from the previous quarter, as the fall in property prices accelerated during the period.
“The economic outlook (for Hong Kong) remains cloudy on all fronts if the border remains partially open in the fourth quarter,” said Samuel Tse, an economist at DBS Bank.
Foreign trade will continue to come under pressure, he added.
In September, Hong Kong’s total merchandise export volume fell 15.3% from a year ago, with total export volume to the United States down 30.7% year-on-year and a 16.2% decline to mainland China.
In a blog post on Sunday, Finance Secretary Paul Chan said the economic outlook was “not optimistic”, but added that the momentum for the economic recovery would gradually strengthen if the city’s COVID situation remained under. control and outside activities resumed.
Reporting by Twinnie Siu and Donny Kwok; Editing by Angus MacSwan
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