Hong Kong has plunged into recession after “local social incidents” – code for mass pro-democracy protests – prompted a sharp deterioration in the economy.
Official figures from the territory’s government estimated that gross domestic product (GDP) shrank by 3.2% in the third quarter, after a 0.5% decline in the previous three-month period.
The report said that having recorded two quarters in a row of contraction, Hong Kong had “entered a technical recession” and sounded a gloomy note over the rest of the year, saying the economy was “very likely to record a negative growth for 2019 as a whole”.
It is Hong Kong’s first recession for a decade.
The government said the protests had taken “a heavy toll on inbound tourism” while domestic demand also worsened significantly.
“As the weakening economic conditions dampened consumer sentiment, and large-scale demonstrations caused severe disruptions to the retail, catering and other consumer-related sectors, private consumption expenditure recorded its first year-on-year decline in more than ten years,” the government added.
“The fall in overall investment expenditure steepened amid sagging economic confidence.”
The government said the economy had already been struggling since last year amid a slowdown in global growth and trade tensions between Washington and Beijing – gloomy conditions which earlier this month saw mainland China record its slowest quarterly growth for 27 years.
It added: “The situation showed an abrupt deterioration recently due to the severe impacts of the local social incidents.”
With the protests yet to show signs of abating, the economy “will still face notable downward pressures in the rest of the year,” the government said, adding that local business sentiment had “turned very pessimistic”.
“Considering the year-on-year contraction of 0.7% in the first three quarters and the lack of any signs of improvement in the near term, the economy is very likely to record a negative growth for 2019 as a whole.”
Hong Kong is one of the world’s most popular tourism destinations and a busy container port as well as a major financial centre for Asia, notably for HSBC.
Economic problems in the territory were among the factors cited by the banking giant when it posted a bigger than expected fall in quarterly profits earlier this week.
Hong Kong’s retail sales have suffered with shops closing to avoid sometimes violent clashes between riot police and protesters while tourist arrivals have dropped the most since Severe Acute Respiratory Syndrome struck the territory in 2003.
Protesters are angry over what they see as Beijing’s increased interference in Hong Kong.
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