Hong Kong’s economy continues to contract in the third quarter and will contract by more than 6% for the year.

Hong Kong’s gross domestic product (GDP) fell 3.5 percent on an annualized basis in the third quarter, the Hong Kong government announced on Friday (Nov. 13), marking the fifth consecutive quarterly contraction in GDP. The figure was also lower than the 3.4 percent decline that had been expected.

The Census and Statistics Department of the Hong Kong Government explained that the main reason for Hong Kong’s continued economic decline was the poor recovery performance of tourism and consumption in Hong Kong due to the virus pandemic.

However, the decline was significantly narrower in the third quarter compared to the previous two quarters. Hong Kong’s GDP fell by 9.1 percent in the first quarter and 9 percent in the second quarter.

According to the Hong Kong government, the slowdown in economic contraction in the third quarter was mainly due to an improvement in the external trading environment as economic growth accelerated on the mainland, stabilization of the local epidemic situation later in the quarter, and a smooth channel for financial market activity and a thriving market.

The Hong Kong government also made a forecast for Hong Kong’s full-year GDP trend on the same day, putting the economy’s contraction at 6.1 percent for the year. Reuters quoted the Hong Kong government’s economic adviser Au Sik-hung (Andrew Au Sik-hung) as saying that this forecast figure takes into account the actual performance of the first three quarters of the year and the cushioning effect of the government’s massive relief measures.

The annual decline of 6.1 percent is the lowest in Hong Kong’s history, even after the 1998 Asian financial crisis, when the economy fell only 5.9 percent.

However, O’Shea believes that unless Hong Kong’s local neo-coronavirus case figures soar again or global economic activity suddenly deteriorates, the Hong Kong economy will be expected to show a slight improvement in the fourth quarter. The Hong Kong government reportedly launched two rounds of a bailout fund of more than HK$300 billion in the first half of this year to subsidize employers and wage earners.

Ou Sai-hung also warned that uncertainty in the external economic environment would constrain Hong Kong’s economic recovery. He said that the current epidemic situation in many countries is still worsening, and it is difficult for Hong Kong to see strong growth in tourism and consumption.

However, the stronger recovery in mainland China is expected to provide some support for Hong Kong’s exports in the short term.