ENG-2019 — Page 70

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The Economy

Total exports of goods fell in 2019, as the global economic slowdown and Mainland-US trade tensions dampened trade and investment worldwide. Exports to most major markets recorded declines of varying degrees. Exports of services worsened visibly and registered the biggest annual decline on record that was particularly drastic in the second half as social unrest caused a severe setback in inbound tourism.

Domestic demand retreated in 2019, especially in the second half when consumption-related activities and economic sentiment were severely affected by the local social incidents. Private consumption expenditure posted the first annual decline since 2003. Overall investment expenditure recorded the biggest drop in two decades, with machinery and equipment acquisition falling sharply and building and construction expenditure weakening further.

The labour market came under increasing pressure during 2019, especially in the second half when economic conditions deteriorated abruptly. The seasonally adjusted unemployment rate went up from a low of 2.8 per cent in the second quarter to 3.3 per cent in the fourth quarter, with those sectors related to consumption and tourism showing more visible increases. The underemployment rate also edged up to 1.2 per cent in the fourth quarter, after staying at a low of 1 per cent in the previous three quarters. As economic conditions worsened, growth of wages and earnings decelerated in the second half of the year.

The residential property market stayed generally active during the first five months of 2019, after which it quietened visibly from June as sentiment was dampened by the weaker global economy, Mainland-US trade tensions, local social incidents and their impacts on the local economic outlook. While flat prices had generally softened since June, on average a cumulative increase of 6 per cent was still recorded across the year.

The local stock market showed considerable volatility in 2019, as market sentiment swung along with the abrupt changes in external and local situations. The Hang Seng Index closed the year at 28,190 points, 9.1 per cent higher than in end-2018.

Overall price pressures were largely moderate. Nonetheless, underlying consumer price inflation went up from an average of 2.6 per cent in 2018 to 3.0 per cent in 2019, primarily due to a sharp increase in pork prices amid a reduced supply of fresh pork since May.

Structure and Development of the Economy

Hong Kong is a global centre for world trade, finance and business, located strategically at the doorstep of the Mainland's huge and vibrant economy. According to the World Trade Organisation, Hong Kong was the world's eighth largest merchandise trading entity in 2019. It operates one of the world's busiest airports in terms of the number of international passengers and volume of international air cargo handled, as well as one of the busiest container ports by container throughput.

Hong Kong was also the world's sixth largest banking centre in terms of external positions as at end-2019, and the fourth largest foreign exchange trading centre according to a triennial survey conducted by the Bank for International Settlements in 2019. Its stock market was the third

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