HONG KONG: Hong Kong’s economy shrank in the first quarter from the final three months of last year, due to falling exports and weak consumer spending, with the risk that momentum will slow further.
On the doorstep of the world’s second-largest economy, Hong Kong has been buffeted by the Chinese mainland’s slowdown. A slump in visitors from the mainland, weak retail sales and falling asset prices have combined to put the economy on the verge of recession.
The trade-dependent economy contracted 0.4 percent in the first quarter, the first contraction in nearly two years.
On an annual basis, growth was just 0.8 percent in the first quarter, its weakest pace in four years. It was worse than economists’ expectations of 1.48 percent growth and less than half the pace of the fourth quarter.
“We think in the second quarter, or even the second half, there should be even more of a slowdown,” said Kevin Lai, senior economist at Daiwa Capital Markets in Hong Kong.
“I am also worried that the macro situation in Hong Kong looks like we are not any better than 1997 and 1998,” he said, referring to the period before the Asian financial crisis.
The city’s economy grew 2.4 percent last year, about half the pace of 2011, as the mainland’s slowdown and a weaker yuan curbed mainlanders’ spending, while a volatile stock market also hit domestic consumption.
Hong Kong’s tourist arrivals, which dropped 20.5 percent in February, slid 4.3 percent from a year earlier to 4.21 million in March. Mainland visitors, which accounted for 72 percent of the total, fell 6.9 percent to 3 million.
Cracks are also widening in the real estate market, one of the dearest in the world, and accounting for nearly a fifth of economic output. Apartment prices are down by 12 percent from a September high and banks predict a 20 percent decline in coming months.
While the city announced a range of relief measures in its March budget, a turnaround in economic activity is unlikely in the near term given weak global growth and Hong Kong’s strong links to a slowing mainland economy, analysts said.
