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Chapter 3
The Economy
Hong Kong's economy showed great resilience in countering the financial tsunami and the ensuing global recession. Although the economy contracted for 2009 as a whole, year-on-year growth resumed in the fourth quarter. Unemployment peaked in the second quarter, then came down progressively for the rest of the year. Inflationary pressure was subdued for most of the year.
2009 was a year of exceptional gyrations in the Hong Kong economy. It suffered a heavy blow in the early part of the year as the global financial tsunami mutated into the most severe global recession since the Second World War. Then, with the Mainland taking the lead in the global economic recovery, Hong Kong also staged a notable rebound during the second quarter, and improved further in the rest of the year. For 2009 as a whole, the Gross Domestic Product (GDP) contracted by 2.7 per cent in real terms, the first annual recession since 1998.
This followed a 2.1 per cent growth in 2008, and represented the second year of sub-par growth. Indicating the exceptional shocks from the global crisis in early 2009 and the subsequent recovery, GDP went sharply down by 3.1 per cent in real terms in the first quarter on a seasonally adjusted quarter-to-quarter comparison, rebounded notably by 2.9 per cent in the second quarter, and grew further by 0.4 per cent and 2.3 per cent respectively in the third and fourth quarters. The progressive improvements were more visible from the year-on-year profile, with the rate of decline in GDP narrowing notably from 7.5 per cent in the first quarter to 3.7 per cent and 2.2 per cent respectively in the second and third quarters, followed by the return to positive growth at 2.6 per cent in the fourth quarter (Chart 1).
The setback in merchandise exports during most of 2009 imposed a significant drag on Hong Kong's economic growth. They suffered their steepest drop since 1954 in the first quarter of the year amidst the collapse in demand from the advanced economies and its knock-on effect on intra-regional trade. They then saw improvement in the following quarters, initially on the recovery in the Asian region led by the return to rapid growth in the Mainland economy from the second quarter, then on the gradual bottoming-out in demand from the advanced economies. following the resumption of growth from the third quarter. The improvement was