Unexpectedly, Hong Kong's economy shrank in the three months to the end of June, hit by high inflation and the global downturn, the government said August 15. Gross domestic product fell by 1.4%, seasonally adjusted, from the previous three months, the first quarter-on-quarter decline since the SARS crisis of 2003.
It was 4.2% higher than in the second quarter of 2007 in real terms, well short of economists' expectations for 5.3% growth year on year. Government economist K-C Kwok blamed the global downturn for the slowdown, which followed a sustained period of strong growth. "The moderation... indicated that the headwinds from the slowing growth in the advanced economies and lingering financial market turbulence had increasingly posed a drag on the economic growth of the Asian region, including that of Hong Kong," he said.
The global economic environment would be "increasingly challenging going forward," the government warned, citing high commodity prices, volatile financial markets and the global slowdown.
Rising inflation across Asia also posed a threat to the region's economies, it said, predicting "moderate" economic growth of between 4% and 5% for 2008 as a whole. In Hong Kong, inflation rose to 5.7% in the second quarter, pushed up by rising food prices.
Exports grew by 4.4% year-on-year in real terms as demand from China and other emerging economies held firm and EU economies continued to expand, the government said.
Employment remained strong but domestic consumption slowed as rising prices, stock market falls and the economic slowdown hit consumer confidence, it said.
Copyright Agence France-Presse, 2008