1

First Quarter Economic Report 2020&

Updated economic forecasts for 2020

15 May 2020

Hong Kong SAR Government

1

2

Highlights of the latest economic situation

• Hong Kong’s economic recession deepened in Q1. Real GDP contracted sharply by8.9% from a year earlier, the steepest for a single quarter on record

• The threat of COVID-19 and resulting social distancing measures seriouslydisrupted consumption-related activities

• Export performance was weighed by the serious impact on the regional supply chains and related trading activities amid the threat of COVID-19

• Labour market showed further deterioration; Consumer price inflation remained moderate

• Economic growth forecast for 2020 has been revised downwards to -4% to -7%; Underlying inflation rate forecast is revised downwards to 2.2%

3

Economic performance in Q1 2020

The Hong Kong economy contracted by the steepest pace on record both year-on-year and quarter-to-quarter in Q1

4

Q12015

Q12016

Q12017

Q12018

Q12019

Q12020

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

按年增減

Year-on-year change

經季節性調整後按季增減

Seasonally adjusted quarter-to-quarter change

實質增減率 (%)Rate of change in real terms (%)

本地生產總值

Gross Domestic Product

-8.9%

-5.3%

十年平均增長

10-year trend growth2.9%

5

External sector

5

6

Regional production and trading activities weakened visibly since March

6

註： (^) 內地的數字為官方製造業採購經理指數；其他經濟體的數字為Markit製造業採購經理指數。(*) 內地在一月和二月的數字為該兩個月份合計的平均增減率。

Notes: (^) Official manufacturing PMI for the Mainland; Markit manufacturing PMI for other economies.(*) The figures for the Mainland in January and February refer to the average rate of change for the two months combined.

01/18 07/18 01/19 07/19 01/2020

30

40

50

60

70製造業採購經理指數^Manufacturing PMI^

台灣

Taiwan

韓國

Korea

印度

India

日本

Japan

內地

The Mainland

01/18 07/18 01/19 07/19 01/20-40

-30

-20

-10

0

10

20

30

40

以美元計算的按年增減率(%)Year-on-year rate of change in US dollar terms (%)

韓國

Korea

印度

India

日本

Japan

台灣

Taiwan

貨物出口貨值

Exports of goods in value terms

內地*The Mainland*

指數

Index

Q12015

Q12016

Q12017

Q12018

Q12019

Q12020

-15

-10

-5

0

5

10

15貨物出口

Exports of goods

-9.9%

按年實質增減率 (%)Year-on-year rate of change in real terms (%)

2019 2020

Annual Q3 Q4 Q1

Mainland -5.1 -7.2 2.9 -2.2

U.S. -15.5 -15.3 -21.5 -25.9

E.U. -7.4 -13.4 -15.7 -24.4

Japan -7.5 -3.6 -13.1 -15.7

India -11.7 -12.7 -0.9 -0.1

Korea -0.2 -5.2 -8.6 -8.9

Singapore 8.2 -0.1 2.5 -14.8

Exports of goods to many major markets fell sharply

Total exports of goods by major markets

Year-on-year rate of change in real terms (%)

7

8

Exports of services posted the biggest fall for a single quarter on record

8

Q12015

Q12016

Q12017

Q12018

Q12019

Q12020

-40

-30

-20

-10

0

10

20服務輸出

Exports of services

-37.8%

按年實質增減率 (%)Year-on-year rate of change in real terms (%)

99

Exports of services

Year-on-year rate of change in real terms (%)

Exports of travel services fell drastically; exports of transport, business and other services also took a dive

Travel TransportFinancial services

Business and other services

2019 Annual -21.0 -7.6 -2.1 -3.8

Q1 2.1 -0.4 -2.8 -2.6

Q2 1.3 -3.6 -0.4 -2.3

Q3 -31.3 -10.7 -2.7 -5.1

Q4 -52.6 -15.4 -2.1 -5.0

2020 Q1 -80.6 -32.9 0.4 -13.6

10

Domestic sector

10

11

The fall in private consumption expenditure widened sharply to the steepest on record

11

Q12015

Q12016

Q12017

Q12018

Q12019

Q12020

-15

-10

-5

0

5

10

15

按年實質增減率 (%)Year-on-year rate of change in real terms (%)

-10.1%

私人消費開支

Private consumption expenditure

Q12015

Q12016

Q12017

Q12018

Q12019

Q12020

-20

-15

-10

-5

0

5

10

15

按年實質增減率 (%)Year-on-year rate of change in real terms (%)按年實質增減率 (%)Year-on-year rate of change in real terms (%)

-14.3%

本地固定資本形成總額

Gross domestic fixed capital formation

12

Overall investment expenditure continued to show a sharp contraction

12

Year-on-year rate of change in real terms (%)

Overall investment expenditure

Machinery, equipment and

intellectual property products

Building and construction

2019 Annual -20.0 -6.2

Q1 -2.0 -4.3Q2 -12.2 -11.1Q3 -26.5 -2.8Q4 -32.3 -6.5

2020 Q1 -18.0 -9.1

13

Labour market

13

14

註： 除整體失業率外，其他均為未經季節性調整數字。Note: Not seasonally adjusted except the overall unemployment rate.

Q12000

Q12001

Q12002

Q12003

Q12004

Q12005

Q12006

Q12007

Q12008

Q12009

Q12010

Q12011

Q12012

Q12013

Q12014

Q12015

Q12016

Q12017

Q12018

Q12019

Q12020

0

2

4

6

8

10

12

較低技術勞工

Lower-skilled workers

整體

Overall

失業率 (%)Unemployment rate (%)

專業及管理員工

Professional andmanagerial staff

2.5%

4.2%4.8%

14

Labour market showed further sharp deterioration as economic recession deepened

按年增減率 (%) 失業率 (%) Year-on-year rate of change (%)

30

20

10

0

-10

-20

-30

-40

-50

-60

-70

-80

-90

零售銷售量 volume Retail sales volume

訪港旅客 Visitor arrivals

食肆總收益量 Restaurant receipts

Unemployment rate(%)10

9

-80.9%

-36.9% -32.3%

零售、住宿及膳食服務業 Retail, accommodation and food services sectors

餐飲服務活動業 Food and beverage service

activities sector

零售業 Retail sector

8.6% 8

7 6.8%

6 5.6%

5

4

3

2

1

0 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020

Consumption- and tourism-related sectors, hard hit by COVID-19, saw a surge in unemployment

1515

Year-on-year rate of change (%)

Nominal growth Real growth

Index of payroll per person engaged (Q4 2019) 2.4 -0.6

Wage index (December 2019) 2.8 -0.5

Average monthly employment earnings of full-time employees of the lowest three decile groups (Q1 2020) 4.4 3.3

Median monthly household income (Q1 2020) -3.8 -5.7

1616

Note: (*) Excluding foreign domestic helpers.

Income*

Wages and earnings rose at a decelerated pace, household income fell further

17

Inflation

17

18

While prices of pork and some other basic foodstuffs recorded larger increases, consumer price inflation remained moderate

各主要組成項目對基本綜合消費物價指數按年變動率的貢獻Contribution to the year-on-year rate of change in the underlying Composite Consumer Price Index (CCPI)

by major component

1.2 0.9 0.8 0.8

0.4 0.6 0.7 0.7 0.9 1.0 1.0 0.8 0.9 1.1 1.7 1.7 1.8

1.3

1.1 0.9 0.7

0.6 0.7 0.6 0.7

0.8 0.9 1.0 1.1 1.0

1.0

0.8 0.8 0.6

2.8

2.3 2.1 2.1

1.4

2.0 1.7 1.6

2.4 2.4 2.8 2.9

2.7 2.9

3.3 3.0 2.9

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20

其他

Others交通

Transport私人房屋租金

Private housing rent食品

Food基本綜合消費物價指數

Underlying CCPI

(%)(%)

18

19

Property market

19

註： 中小型單位指實用面積小於100平方米的單位，而大型單位指實用面積至

少達100平方米的單位。

Note: Small/medium-sized flats refer to those with a saleable area of less than 100 m2, while large flats refer to those with a saleable area of at least 100 m2. 2020

The residential property market lacked clear direction in Q1

2121

Index of home purchase affordability (i.e. mortgage repayment to income ratio) remained elevated

22

Total medium-term flat supply would increase to 95 000

22

23

Outlook for the rest of 2020

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The global economy is experiencing an unprecedented shock and facing very high uncertainties amid the spread of COVID-19

Mainland: The economy saw its first ever year-on-year contraction in Q1, but has shown relative improvement since March alongside the containment of the epidemic

U.S.: Unemployment has risen sharply and the market expects economic contraction to deepen notably in Q2

Euro area: The economy recorded a sharp contraction in Q1, with many member states striving to reopen their economies

Rest of Asia: Growth in many regional economies slowed visibly with some even turning into a fall

24

指數 指數 Index Index

70

歐元區 Euro area

美國 US

內地

70服務業採購經理指數 * 製造業採購經理指數 ̂

Manufacturing PMI^ 美國 Services PMI* 60

60

50

50 40

30 40

20 The Mainland

30 10

20 0

US

歐元區 Euro area

內地 The Mainland

01/18 07/18 01/19 07/19 01/20 01/18 07/18 01/19 07/19 01/20

註： (^) 內地的數字為官方製造業採購經理指數；其他經濟體的數字為 Markit製造業採購經理指數。 (*) 內地的數字為官方非製造業採購經理指數；其他經濟體的數字為 Markit服務業採購經理指數。

Notes: (^) Official manufacturing PMI for the Mainland; Markit manufacturing PMI for other economies. (*) Official non-manufacturing PMI for the Mainland; Markit services PMI for other economies.

Economic activities contracted sharply in the US and the euro area since March, whereas those in the Mainland showed relative improvement

25

GDP growth in 2019

IMF forecasts for 2020 GDP growth

IMF forecasts for 2021 GDP growth

AprChange between

Apr and Jan AprChange between

Apr and Jan

World 2.9 -3.0 -6.3 5.8 +2.4

U.S. 2.3 -5.9 -7.9 4.7 +3.0

Euro area 1.2 -7.5 -8.8 4.7 +3.3

Japan 0.7 -5.2 -5.9 3.0 +2.5

Mainland China 6.1 1.2 -4.8 9.2 +3.4

Developing Asia 5.5 1.0 -4.8 8.5 +2.6

Emerging market and developing economies 3.7 -1.0 -5.4 6.6 +2.0

26

IMF forecast the global economy to shrink by 3.0% in 2020, the worst recession since the Great Depression in the 1930s

-60

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

-10

-8

-6

-4

-2

0

2

4

6

8

10

Q12008

Q12009

Q12010

Q12011

Q12012

Q12013

Q12014

Q12015

Q12016

Q12017

Q12018

Q12019

Q12020

統計處「業務展望按季統計調查」 -

業務狀況預期變動 (淨差額) (右標線)C&SD's Quarterly Business Tendency Survey -

Expected change in business situation (net balance) (RHS)

淨差額* (百分點)Net balance* (% point)

按年增減率 (%)Year-on-year rate of change (%)

實質本地生產總值(左標線)

Real GDP growth (LHS)

27

註： (*) 淨差額展現了業務狀況預期較前一季的變動方向。它是填報「較佳」的機構單位百分比與填報「較差」的機構單位百分比的差距。正數指可能向上趨升，而負數則為可能跌勢。

Note: (*) Net balance indicates the direction of expected change in business situation versus the preceding quarter. It refers to the difference inpercentage points between the proportion of establishments choosing “better” over that choosing “worse”. A positive sign indicates a likelyupward trend while a negative sign, a likely downward trend.

Business sentiment among large enterprises remains subdued

中小企調查 其他調查 指數 Surveys on SMEs 指數 Other surveys 指數

Index Index Index65 55 60

60

55 50 50

50

45 45 40

40

35 40 30

30

25 35 20

20

15 30 10

渣打香港中小企

領先營商指數 ͂ Standard Chartered Hong Kong SME Leading Business Index῀

政府統計處編製的中小企

業務收益動向指數 ̂ Diffusion index ̂ on business receipts for SMEs compiled by C&SD

Markit 香港採購經理指數 (左標線 ) Markit Hong Kong PMI (LHS)

香港貿易發展局

出口指數 * (右標線 ) Hong Kong Trade Development Council’s Export Index* (RHS)

01/15 01/16 01/17 01/18 01/19 01/20 01/15 01/16 01/17 01/18 01/19 01/20 註︰ (^) 動向指數是按報稱「上升」的中小企百分比，加上報稱「相同」的中小企百分比的一半計算。動向指數高於 50表示業務狀況普遍向好，低於

50則表示情況恰恰相反。受訪企業在填報意見時已撇除季節性因素的影響。

(~) 自二零一二年第三季開始提供的季度數據。

(*) 指數高於 50，表示超過一半受訪貿易商的意見傾向正面，可解讀為業務向好和信心增強；指數低於 50則表示情況恰恰相反。 Notes : (^) The diffusion index is computed by adding the percentage of SMEs reporting “up” to one half of the percentage of SMEs reporting “same”. A diffusion

index reading above 50 indicates that the business condition is generally favourable, whereas an index below 50 indicates otherwise. Respondents were requested to exclude seasonal effects in reporting their views.

(~) Launched in Q3 2012 and quarterly data. (*) A reading above 50 indicates that more than half of the surveyed traders incline towards the upside, which can be interpreted as an upward trend and an

increase in confidence, and vice versa for a reading below 50.

Most of the other survey indicators also pointed to subdued business sentiment in recent months

28

Hong Kong’s near-term economic outlook is still highly challenging

As the spread of COVID-19 has remained a threat in many major economies, the global economy may continue to experience sharp contraction in the near term, weighing on Hong Kong’s export performance

While the epidemic has abated in Hong Kong, the threat lingers on and local economic activities will take time to fully recover

The US-Mainland trade conflict, geopolitical tensions and global financial market volatility continue to warrant attention

The Government has swiftly rolled out relief measures of unprecedented scale, which should help both companies and individuals endure the current hardship. If the epidemic remains well contained, the economy will hopefully improve gradually in the second half of the year

29

30

Latest economic forecasts for 2020 as a whole

Forecasts as released on 26 February Latest forecasts

Real GDP growth -1.5% to +0.5% -4% to -7%*

Underlying inflation 2.5% 2.2%

Headline inflation 1.7% 1.4%

30Note: (*) Announced by the Financial Secretary on 29 April.

31

First Quarter Economic Report 2020&

Updated economic forecasts for 2020

15 May 2020

Hong Kong SAR Government

31