Hong Kong’s Revised 1st-Quarter Figures Signal Deepening Recession

Hong Kong’s economy shrank a revised 2.8% during the first quarter and probably contracted even more in the second, the government said Monday, amid signs that the city’s first recession in more than a decade will be deeper than many had forecast.

The government revised the first-quarter figures after reporting in May that the gross domestic product shrank 2%.

The contraction, the first since 1985 and the worst since 1975-76, shows how slowing growth across the rest of Asia is taking its toll on the territory. The slowdown has already hammered Hong Kong stocks, with the Hang Seng index tumbling about 30% so far this year.

“The numbers don’t come as a surprise,” said Jan Lee, chief economist at Hong Kong and Shanghai Banking Corp., a unit of HSBC Holdings.

Many of Hong Kong’s biggest companies are already feeling the pain. HSBC, the London-based parent of Hong Kong’s two largest banks, said Monday that first-half net profit fell a worse-than-expected 16%. Profit probably fell by more than twice that much at many other companies.

The slowdown is apparent in declining Hong Kong property prices, falling retail sales and rising unemployment. The economy probably shrank as much as 5% in the second quarter, Lee said.

Hong Kong Financial Secretary Donald Tsang, usually an optimist, said the second-quarter figures will be “pretty miserable by Hong Kong standards.”

Government economist Tang Kwong-Yiu went further, saying the figure for the second quarter is likely to be worse, as domestic demand continued to slow and tourist arrivals dropped.