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Third-quarter gross domestic product declined 3.2 percent, government data showed, the biggest drop since the financial crisis. That followed shrinkage of 0.4 percent during the second quarter. A recession occurs when there are at least two consecutive quarters of contraction.
Police officers restrain protesters during a rally in Hong Kong, Oct. 27, 2019. (AP Photo/Kin Cheung)
Economic growth in the former British territory has “moderated progressively since last year amid a slowing global economy and U.S.-Mainland trade tensions,” a government press release said, adding that recent “social incidents” have caused an “abrupt deterioration.”
The main driver of the decline was private consumption, which accounts for more than 70 percent of GDP.
“This reflects the intensifying protests which shuttered stores, disrupted public transport and deterred tourists,” Julian Evans-Pritchard, senior China economist at the research firm Capital Economics, wrote from Singapore.
Hong Kong police officers push back journalists during a rally in Hong Kong, Oct. 27, 2019. (AP Photo/Kin Cheung)
On Oct. 2, government data showed retail sales in August plunged 23 percent from a year ago, the steepest decline on record, as hotels in some areas of the city saw occupancy rates drop as much as 70 percent. Visitors from mainland China, who make up 76 percent of all tourists, were down 42 percent.
The pro-democracy protests aren’t the only challenge weighing on Hong Kong’s economy. Exports of goods fell 7 percent year-over-year, “reflecting the further slackening of manufacturing and trading activities worldwide,” the government said. Exports of services were down 13.7 percent year-over-year, the steepest annual decline since 2003.
The government expects the economy to “face notable downward pressure” for the remainder of the year.
Evans-Pritchard agrees that the near-term outlook “remains downbeat” but says the pace of contraction should ease, “barring a more serious escalation of protests.”
Still, "the political crisis has done lasting damage to Hong Kong’s reputation as a stable, autonomous financial hub,” he wrote.