In the third quarter of 2019, Hong Kong’s GDP has fallen at the highest rate since 2009, by 3.2%, and a recession has begun in the region’s economy. In the second quarter, Hong Kong’s economy fell by 0.4% compared with January-March.
In annual terms, in the third quarter, the economy declined by 2.9% after rising 0.5% in the previous quarter.
The pace of the economic downturn exceeded all expert forecasts. For the last five months, mass protests continued in the city, which led to a political crisis, a decline in investor confidence in the region, and a decline in retail sales and tourism. Now experts are discussing how long the recession will last.
Earlier this month, Hong Kong Minister of Finance Paul Chan unveiled a package of measures totalling about 2 billion Hong Kong dollars ($ 255 million), dedicated to supporting the tourism industry and the transport sector. Earlier this week, Chan announced that he considers the recession in Hong Kong’s economy “very probable” for the whole of 2019: “It seems to be very difficult to achieve a forecast of GDP growth of up to 1% this year, and, with a high probability, the economy will decline” According to him, the protests caused massive damage to the city’s economy.
The Hong Kong Monetary Authority (HKMA, the de facto central bank) on Thursday cut its key interest rate following the Federal Reserve System (FRS) to 2% from 2.25%. The Hong Kong dollar is pegged to the US dollar, and HKMA follows the Fed policy.
Eddie Yue, who is responsible for monetary policy at HKMA, said that there is currently no significant outflow of capital from Hong Kong. He noted that the Hong Kong dollar as a whole is stable.
Protests in Hong Kong began in June against proposals for amendments to the law that would allow authorities to expel suspected criminals to mainland China. The bill was withdrawn in October, but protests continued with new demands.