Hong Kong's Q3 GDP Slumps 4.5% As Exports Decline

Hong Kong's economy contracted at a 4.5% y/y pace in the third quarter, the biggest fall in growth since Q2 2020 as exports weakened further, data from the Census and Statistics Department (C&SD) showed on Monday.

The September quarter marked the third consecutive quarter of a year-on-year contraction in growth, accelerating from a 1.3% y/y decline recorded in the June quarter. The advance estimate of GDP makes the government's task of hitting its official target of -0.5% to 0.5% growth in 2022 increasingly unlikely. The revised estimate for 2022 GDP growth will be released on November 11, the C&SD said.

The decline was attributed largely to continued weak external demand. Exports declined 15.5% y/y, accelerating from an 8.4% fall posted in Q2. (SEE MNI BRIEF: Hong Kong's Exports Fall For Fifth Straight Month)

Compounding the difficult outlook, the Hong Kong Monetary Authority (HKMA) will meet on Thursday to likely raise interest rates in step with the expected 75bp Fed hike due on Wednesday. (SEE MNI: Ex-Officials Now See Fed Rate Peak At 5% Or Higher)

“Inflation and aggressive monetary policies in advanced nations will continue to pressure the economy into Q4” despite improvements in Covid stability and the labor market, the C&SD said. The government would continue its Consumption Voucher Scheme to support domestic demand.

“In Q4 rising borrowing costs will further dampen fixed asset investment,” C&SD said.