ENG-2019 — Page 81

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The Economy

domestic demand. Imports for subsequent re-export also fell noticeably in tandem with the enlarged decline in merchandise exports.

Exports of services deteriorated sharply and slumped 10.2 per cent in real terms in 2019, the largest annual decline on record. This followed a solid expansion of 4.6 per cent in 2018. The downward spiral was particularly drastic in the second half of the year, as the social unrest dealt a severe blow to inbound tourism (chart 6). Exports of travel services plunged and recorded the largest annual decline on record. Other services exports were also dragged down by mounting external headwinds. Specifically, exports of transport services went into a visible decline, reflecting subdued cargo and passenger flows. Exports of financial, business and other services also fell, as cross-border financial and commercial activities weakened amid softening global economic growth.

Chart 6

15

10

5

Hong Kong's Services Trade (year-on-year rate of change in real terms)

Per cent

Imports of

services

-5

-10

Exports of services

-15

-20

-25

220

-30

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015

2016

I

2017

Q2 Q3 Q4 Q1

Q2 Q3 Q4

2018

!

2019

Exports of services deteriorated sharply in 2019.

Note: Exports and imports of services are compiled based on the change

of ownership principle.

Imports of services switched to a decline of 2.4 per cent in real terms in 2019, after recording 2.8 per cent growth in 2018. Of the various services, imports of travel services decelerated in the second half and registered only modest growth for the year as a whole, as worsened economic sentiment increasingly weighed on the spending of residents travelling abroad. Imports of transport services fell, noticeably in the second half, due to subdued cargo and passenger flows. Imports of manufacturing services recorded a double-digit drop, reflecting weakness in outward processing activities amid sagging global demand and heightened Mainland-US trade tensions. Imports of business and other services also slackened in the face of the difficult external environment, recording a modest decline for the year as a whole.

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