HK economy nosedives in first quarter

Apr.29.2009 Business news

HONG KONG, May 15 (Reuters) - Hong Kong’s economy shrank by 4.3 percent in the first quarter from the previous three months, the worst performance since records were compiled in 1990 and reflecting Asia’s vulnerability to the global economic downturn as plummeting exports hurt investment and consumption.

The worse-than-expected quarterly contraction prompted the government to revise down its full-year forecast for gross domestic product. It now expects the economy to contract by between 5.5 and 6.5 percent this year, against an earlier forecast for a 2-3 percent drop.
Financial Secretary John Tsang said the government would announce more relief measures to help the economy within a month.
“I anticipate that Hong Kong’s economic performance in the second quarter will remain difficult,” Tsang told a news conference.

The economy has now shrunk for four straight quarters, its longest downturn since 2001 after the dotcom bubble burst and tracking trends in regional neighbours Japan, Singapore and New Zealand.
“It is obviously worse than expected. It tells you how a severe global financial crisis can affect a healthy, small and open economy,” said Dong Tao, chief economist at Credit Suisse.
“Will Hong Kong see a further deterioration? It is not up to Hong Kong — it is up to the rest of the world especially the United States, China and the financial market.”
Chief Executive Donald Tsang warned on Thursday that the outlook for the economy in the second quarter was not optimistic as the global economy has yet to stabilise.

Compared with a year earlier, GDP fell 7.8 percent in the quarter, worse than a forecast 5.2 percent decline and the weakest performance since the third quarter of 1998 during the Asian financial crisis.
As a trading and financial hub, Hong Kong is highly exposed to both weak Western consumer demand and woes in the global financial sector.