The Economy | 49
had already slowed down in early 2008, plunged into recession in the latter half of the year when the financial crisis initiated by the sub-prime mortgage problem in the United States escalated abruptly into the most dangerous financial tsunami since the late 1920s. In response to the crisis, many unprecedented measures were implemented by the governments of the major economies. By the end of 2008, while the risk of a systemic meltdown in the financial market receded, the financial markets in these economies remained strained, and the impact on the real economy emerged, leading to significant contraction in economic activities, severe job losses. and a sharp cut-back in import demand. In sum, the advanced economies were mired in recession. With rapidly falling demand from the advanced economies, the pressure on the goods flows among the export-dependent Asian economies was also increasingly significant, particularly towards the final two months of 2008 when most of the Asian economies recorded double-digit declines in exports.
The performance of Hong Kong's total exports of goods weakened notably over the course of 2008, with the year-on-year growth rate slowing from 9.1 per cent in real terms in the first quarter to 5.4 per cent and 2.1 per cent respectively in the second and third quarters. As the synchronised global downturn took its toll on world trade, exports slipped into a decline of 3.5 per cent in the fourth quarter. Within the total exports of goods, re-exports still accounted for an overwhelming proportion and showed a moderate increase in 2008 as a whole, while domestic exports, constituting a small share, continued to shrink (Chart 7).
Chart 7
Hong Kong's Visible Trade
(year-on-year rate of change in real terms)
Per cent
25
20
20
15
10
LO
5
0
-5
-10
Total exports
Imports
of goods
of goods
-15
1998 1999 2000 2001
2002 2003 2004 2005 2006 2007 2008
Merchandise exports slackened distinctly over the course of 2008 as the synchronised global downturn severely hit world trade.
Hong Kong's total exports to the advanced economies generally slackened during 2008. The main drag initially came from the US market, but the slackening trend increasingly spread to other major markets in the aftershock of the global