Worst-ever 8.9pc plummet for GDP

Hong Kong is heading for a deeper recession amid the coronavirus pandemic, with real gross domestic product falling 8.9 percent from a year earlier in the first quarter - the largest decline on record, according to the Census and Statistics Department.

GDP deepened from a 3 percent contraction in the fourth quarter of 2019.

The record decline surpassed the 8.3 percent decrease in the third quarter of 1998 and a 7.8 percent contraction in the first quarter of 2009 - the two worst quarterly readings since 1974.

In terms of GDP components, private consumption expenditure shrank by 10.2 percent year-on-year in the first quarter, deteriorating from the 2.9 percent decline in the fourth quarter last year.

The fall in domestic demand widened as the pandemic and its resulting social distancing measures disrupted consumption-related activities, while austere labor market conditions dealt a heavy blow to consumer sentiment, said a government spokesman.

Government consumption expenditure measured in national account terms grew by 8.3 percent from a year ago, while gross domestic fixed capital formation fell 13.9 percent from a year earlier.

Total exports of goods - one of the major pillars of GDP - recorded a decline of 9.7 percent from a year earlier, with exports of services falling 37.8 percent in the first quarter this year.

The drop was mainly weighed by disruptions to the regional supply chains and related trading activities amid the pandemic, while the decrease in exports of services reflected the setback in inbound tourism, said the spokesman.

On a seasonally adjusted quarter-to-quarter comparison, the fall in real GDP widened to 5.3 percent in the first quarter, also the steepest on record.

Developments in the US-China relationship, geopolitical tensions and global financial market volatility also warrant continued attention, the spokesman said.

But Financial Secretary Paul Chan Mo-po expects the economy to recover from a bottom in the second half this year if the pandemic is brought under control.

He noted that any improvement will be "gradual and small."

Chan said the government has launched relief measures worth nearly HK$290 billion in two rounds of anti-pandemic funds and the financial budget, equivalent to 10 percent of GDP.

It will facilitate the full implementation of the existing stimulus before introducing further reliefs, he added.

Economists warn that second-quarter figures will continue to be poor amid less consumption.

Liao Qun, chief economist of China CITIC Bank International, projects second-quarter GDP will shrink by 4.5 percent, and full-year GDP growth to be negative 2.8 percent with recovery in the second half.

Recovery will be slower, Liao added, if the Sino-US trade war resumes.

stella.zhai@singtaonewscorp.com