HONG KONG — The Hong Kong economic miracle--four decades of uninterrupted growth--suffered a rare setback Friday as officials officially conceded that the Asian trading capital is in recession.
Financial Secretary Donald Tsang said Hong Kong's gross domestic product in the second quarter fell by a steep 5% in real terms over the year before. He projected a 4% decline for the full year.
It was the second successive quarter of negative growth, confirming what struggling businesses and property owners had known for months: Hong Kong's economy has gone into reverse and will test the resolve of its people in the months to come.
Meeting with reporters, government economist K.Y. Tang glumly predicted the slide would continue at least until the end of the year, resulting in the first annual decline in Hong Kong's fortunes since at least 1961, when economic statistics were first published here.
One of the boilerplate items in speeches by Hong Kong's last British governor, Chris Patten, was that Hong Kong's industrious people had racked up "36 years of uninterrupted growth"--a record he claimed was unmatched anywhere else in the world.
The ongoing Asian financial crisis gets the blame, but the timing of the downturn coincides almost exactly with Hong Kong's return to Chinese sovereignty in July 1997.
In the first four quarters under Chinese rule, the Hong Kong economy has grown by less than 1%. In addition, unemployment has risen to 4.8%, the highest since the 1970s oil crisis. Values of shares in the Hang Seng index on the Hong Kong stock exchange have fallen by more than half in the same period.
Ironically, China, whose leaders had long coveted Hong Kong's vibrant economy and financial expertise, is expected to record a year-end positive growth rate at between 6% and 8%.
In its half-yearly economic report released Friday, Hong Kong said the second quarter economic contraction was "mainly due to a further slackening in both local consumer demand and export performance in the second quarter."
The export decline stems from a collapse in demand for products in other Asian countries, notably Japan and South Korea.
The recent poor economic performance has shaken public confidence in Hong Kong's leadership under Chief Executive Tung Chee-hwa, a shipping magnate who was Beijing's handpicked choice to become Hong Kong's first leader in the post-British era.
