Hong Kong Shocked Into First Annual Recession Since Global Financial Crisis

Hong Kong confirmed Friday its economy is crashing into the first recession in nearly a decade in the third quarter, pulled down mostly by a synchronized slowdown in global growth and violent protests in the last six months.

• HONG KONG GOVT SAYS THE QUARTERLY GDP IS THE FIRST YEAR-ON-YEAR DECLINE SINCE THE GREAT RECESSION OF 2009
• HONG KONG GOVT SAYS THE ECONOMY HAS ENTERED A RECESSION
• HONG KONG GOVT SAYS HONG KONG’S EXPORT PERFORMANCE IS LIKELY TO REMAIN WEAK IN THE NEAR TERM
• HONG KONG GOVT SAYS IMPACTS OF LOCAL SOCIAL INCIDENTS HAVE YET TO SHOW SIGNS OF ABATING, CONSUMPTION AND INVESTMENT DEMAND WILL LIKELY REMAIN IN THE DOLDRUMS FOR THE REST OF THE YEAR
• HONG KONG GOVT SAYS BOTH LARGE ENTERPRISES AND SMALL-AND-MEDIUM-SIZED ENTERPRISES ALL INDICATED THAT BUSINESS SENTIMENT HAS TURNED VERY PESSIMISTIC
• HONG KONG GOVT SAYS IT SEES DIFFICULT EXTERNAL ENVIRONMENT IS LIKELY TO PERSIST IN THE NEAR TERM
• HONG KONG GOVT SAYS LOCAL SOCIAL INCIDENTS WITH INTENSIFYING VIOLENCE IN THE PAST FEW MONTHS HAVE KEPT VISITORS AWAY, TAKEN A HEAVY TOLL ON LOCAL CONSUMPTION DEMAND, AND SERIOUSLY DAMPENED ECONOMIC SENTIMENT

GDP contracted 3.2% in Q3 over the previous quarter, in line with preliminary estimates. GDP also declined in Q2, making it the first time a technical recession has been confirmed in the city since the global financial crisis in 2008/2009. Full-year GDP is expected to shrink by 1.3% in 2019.

Hong Kong, already damaged by the global synchronized downturn and trade war, was delivered a death blow to its economy this summer when pro-democracy protesters started battling police on city streets. As a result, six months later, Hong Kong’s financial and trading hubs, shopping malls, restaurants, stores, and the overall domestic economy have collapsed.

“The Hong Kong economy saw an abrupt deterioration in the third quarter of 2019, as the local social incidents dealt a very severe blow to an economy already weakened by a synchronized global economic slowdown and US-Mainland trade tensions,” the government said in a statement. “As the impacts of the local social incidents have yet to show signs of abating, consumption and investment demand will likely remain in the doldrums for the rest of the year.”

Bloomberg provides an infographic of six indicators that shows the recession in Hong kong is worsening. 

Preliminary GDP data for Q4 could be significantly worse, considering the recent plunge in private consumption activity and investment expenditures. Net exports for the city have contracted on the year as the global economy continues to decelerate. 

Hong Kong is merely the first domino to fall ahead of the next global trade recession.