Hong Kong crashes into recession in 2019

This was dragged by GDP contractions recorded in H2 2019.

Hong Kong's economy has fallen into recession as it shrank 1.2% YoY in 2019, recording the first annual decline since 2009, according to the Census & Statistics Department (C&SD).

This was dragged by GDP contractions recorded in H2 2019, as it dipped 2.8% YoY in Q3 and 1.2% YoY in Q4 2019. 

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“Hong Kong’s advance 4Q19 GDP contraction turned out to be better than market’s expectation but in line with our forecast, at -2.9% y/y (Bloomberg: -3.9%, 3Q19: - 2.8%). For the full-year 2019, Hong Kong economy fell 1.2% (2018: 2.9%), recording its first contraction since the Global Financial Crisis in 2009 when it slumped by 2.5%,” said Ho Woei Chen, economist at UOB.

Government consumption expenditure grew 6% YoY in Q4 and 5.1% YoY in 2019, whilst gross domestic fixed capital formation dipped by 12.2% YoY from 2018. UOB added that all key expenditure components contracted in Q4 2019 and that the government continues to roll out more stimulus measures to buffer the economy.

UOB stated that fixed investment and services exports registered the largest fall, contracting by 16.2% YoY in 2019 and 25% YoY in Q4. Likewise, services exports continued to suffer from the sharp pullback in inbound tourism and has also likely contributed to the second consecutive decline in private consumption by -3% YoY in the same quarter.

“Private consumption, which accounts for two-thirds of the economy, is likely to remain weak amidst the rise in unemployment rate and new threats from the 2019-nCoV outbreak in the mainland. Notably, mainland tourists account for 78% of inbound tourist arrivals in Hong Kong and the closure of border crossings due to the 2019-nCoV outbreak will further weigh on Hong Kong’s economic outlook,” Ho explained.

Over the same period, total goods exports and imports declined 4.7% and 7.4%, respectively. Exports of services fell 10.4% YoY in 2019, whilst imports of services slipped 2.3%.

Looking ahead, the government said the outlook for the economy in 2020 is subject to high uncertainties, and also dependent on the development of the novel coronavirus infection in Hong Kong and Asia as the current outbreak could further weigh on economic sentiment, consumption and tourism-related activities.