With the local Covid-19 situation becoming more contained, Hong Kong’s economy registered some improvement in the third quarter. During July to September, GDP shrank by 3.5% year-on-year, compared to the contractions of 9.1% and 9% in Q1 and Q2 respectively.
The moderately improved performance was also due to the low-base effect, since economic activity in the comparable quarter of last year was badly affected by the social unrest. On a quarterly basis, the economy grew by 2.8%, ending five consecutive quarters of decline.
Private consumption and investment spending remained weak, declining by 8.2% and 11.1% year-on-year respectively, though again, these figures are much better than the sharp drops of 14.2% and 21.4% respectively in Q2. Government spending rose by 7%, after the previous quarter’s 9.7% increase.
On the external front, total exports of goods increased by 3.9% compared to the drop of 2.2% in Q2, led by the gradual recovery of the Mainland economy. As border restrictions remained in place and inbound tourism at a standstill, export of services dropped 34.6%, following the 45.6% plunge in the previous quarter.
Looking ahead, the negative impacts of Covid-19 will continue to weigh on the Hong Kong economy, notwithstanding the low-base effect in Q4 2019. It is also worth bearing in mind that the Employment Support Scheme will come to an end this month, paving the way for lay-offs and undermining business and consumer spending.
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