Hong Kong Economic and Trade Office, USA
Hong Kong
News Release



Economic situation in the first quarter of 2020

 



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May 15, 2020 - The Hong Kong Special Administrative Region Government released today the First Quarter Economic Report 2020, together with the revised figures on Gross Domestic Product (GDP) for the first quarter of 2020.

The Government Economist, Mr Andrew Au, described the economic situation in the first quarter of 2020 and the latest GDP and price forecasts for 2020.

The economic recession deepened in Hong Kong in the first quarter of 2020, as the threat of COVID-19 and the necessary anti-epidemic measures seriously disrupted a wide range of local economic activities and supply chains in the region. With the disease evolving into a pandemic in March, the economic fallout became even more severe. Real GDP contracted sharply by 8.9% in the first quarter from a year earlier, after declining by 3.0% in the preceding quarter. On a seasonally adjusted quarter-to-quarter comparison, real GDP plunged by 5.3% in the first quarter, after a decrease of 0.5% in the preceding quarter. Both rates of decline were the steepest for a single quarter on record.

Total exports of goods saw a visibly enlarged year-on-year fall of 9.9% in real terms in the first quarter, weighed by the serious disruptions to economic activities in the Mainland, the regional supply chains and related trading activities amid the threat of COVID-19, and later by sharp moderation of economic activities worldwide. Exports of services plummeted by a record 37.8% in real terms from a year earlier, with inbound tourism at a standstill in February and March and cross-boundary transport and commercial services falling distinctly.

Domestic demand weakened markedly. The year-on-year fall in private consumption expenditure widened sharply to 10.1% in real terms in the first quarter, as the threat of COVID-19 and resulting social distancing measures seriously disrupted consumption-related activities, while austere labour market conditions dealt a heavy blow to consumer sentiment. Overall investment expenditure continued to show a sharp year-on-year contraction of 14.3% in real terms amid subdued business sentiment and falling construction activity.

The labor market showed further sharp deterioration in the first quarter. The seasonally adjusted unemployment rate soared to 4.2%, the highest in more than nine years. The underemployment rate likewise increased notably to an almost 10-year high of 2.1%. Total employment saw a record decrease.

The local stock market showed a notable correction in the first quarter, with market sentiment hard hit by the economic fallout of the COVID-19 pandemic. The residential property market lacked clear direction amid immense uncertainties about the impact of the pandemic and the resultant large-scale monetary easing measures by the major central banks. Trading activities slowed down visibly, while flat prices edged down by 1% during the quarter.

Looking ahead, as many major economies are still facing the serious threat of COVID-19, the global economy may continue to experience sharp contraction in the near term despite the massive monetary and fiscal support measures from central banks and governments worldwide. The progress of reopening the major economies and thus the timing and speed of recovery of the global economy will hinge on the developments of the pandemic and global public health situation, which are subject to huge uncertainties. Besides, the US‑Mainland economic and trade relations, geopolitical tensions and global financial market volatility continue to warrant attention. Amid a still austere external environment, Hong Kong's export performance will remain under pressure in the near term. 

Recently there have been signs that the epidemic is getting contained in Hong Kong. However, local economic activities indicate that business sentiment has remained subdued. As inbound tourism is likely to remain at a standstill until the pandemic is well contained and travel restrictions are gradually eased, the business environment facing the consumption- and tourism-related sectors will remain challenging in the near term.

Considering the sharp economic contraction in the first quarter, the high uncertainties surrounding the pandemic, the difficult global economic situation, but also the cushioning effects of the massive relief measures rolled out by the Government, the real GDP growth forecast for 2020 as a whole has been revised downwards to -4% to -7%, as announced by the Financial Secretary on April 29. If the local epidemic remains well contained and our major trading partners are successful in reopening their economies, Hong Kong's economic performance will hopefully improve gradually in the second half of the year. The Government will continue to closely monitor the situation and introduce measures as necessary to support enterprises and safeguard jobs.

Underlying consumer price inflation edged down to 2.9% in the first quarter from 3.0% in the preceding quarter. Inflationary pressure is likely to ease in the near term. Domestic cost pressures should continue to abate amid the austere local economic situation. External price pressures are expected to subside further in view of the deep global recession and the recent strengthening of the Hong Kong dollar along with the US dollar. Taking into account these factors and the actual outturn in the first quarter, the forecast rates of underlying and headline consumer price inflation for 2020 as a whole are revised downwards to 2.2% and 1.4% respectively, from 2.5% and 1.7% as announced in the Budget.

Looking ahead, as many major economies are still facing the serious threat of COVID-19, the global economy may continue to experience sharp contraction in the near term despite the massive monetary and fiscal support measures from central banks and governments worldwide. The progress of reopening the major economies and thus the timing and speed of recovery of the global economy will hinge on the developments of the pandemic and global public health situation, which are subject to huge uncertainties. Besides, the US‑Mainland economic and trade relations, geopolitical tensions and global financial market volatility continue to warrant attention. Amid a still austere external environment, Hong Kong's export performance will remain under pressure in the near term.

Recently there have been signs that the epidemic is getting contained in Hong Kong. However, local economic activities indicate that business sentiment has remained subdued. As inbound tourism is likely to remain at a standstill until the pandemic is well contained and travel restrictions are gradually eased, the business environment facing the consumption- and tourism-related sectors will remain challenging in the near term.

Considering the sharp economic contraction in the first quarter, the high uncertainties surrounding the pandemic, the difficult global economic situation, but also the cushioning effects of the massive relief measures rolled out by the Government, the real GDP growth forecast for 2020 as a whole has been revised downwards to -4% to -7%, as announced by the Financial Secretary on April 29. If the local epidemic remains well contained and our major trading partners are successful in reopening their economies, Hong Kong's economic performance will hopefully improve gradually in the second half of the year. The Government will continue to closely monitor the situation and introduce measures as necessary to support enterprises and safeguard jobs. For reference, the latest forecasts by private sector analysts range from -3.0% to -8.7%, averaging around ‑5.1%. 

On the inflation outlook, inflationary pressure is likely to ease in the near term. Domestic cost pressures should continue to abate amid the austere local economic situation. External price pressures are expected to subside further in view of the deep global recession and the recent strengthening of the Hong Kong dollar along with the US dollar. Taking into account these factors and the actual outturn in the first quarter, the forecast rates of underlying and headline consumer price inflation for 2020 as a whole are revised downwards to 2.2% and 1.4% respectively, from 2.5% and 1.7% as announced in the Budget .

The First Quarter Economic Report 2020 is now available for online download, free of charge at www.hkeconomy.gov.hk/en/situation/index.htm. The Report of the Gross Domestic Product, First Quarter 2020, which contains the GDP figures up to the first quarter of 2020, is also available for online download, free of charge at the homepage of the Census and Statistics Department at www.censtatd.gov.hk.


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