Hong Kong's economy, which symbolizes a tiny but robust and open economy, has been hit badly by the current global financial crisis. The chiefly exports-driven economy could not escape the wrath of global downturn. Its exports plummeted by 22% year-on-year in the first three months of 2009, and the economy contracted by 7.8% during the same period. This is the economy's worst performance ever since the East Asian financial crisis of 1998. The sharp decline in GDP was double, more than actually anticipated by some analysts and can be attributed to a rapid decline in exports and private consumption, plus a drop in investment in buildings, machinery and other business equipment. Now, the territory's government forecasts GDP to shrink further by around 5.5-6.5% this year, compared with its earlier prediction of a 2-3% fall. Analysts are of the view that recovery depends on how fast the global economy gets back to prosperity.

Post-Asian financial crisis of the late 1990s, Hong Kong's economy had been on the rebound. However, in the meantime, the dotcom bubble of 2000, the 9/11 terrorist attacks on the US in 2001 and the outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003 had severely damaged the economy of Hong Kong, though not to the extent as that of the current one. In the last quarter of 2008, the growth of Hong Kong's economy dipped deep into -2.5%, its worst performance since 1999. This sordid performance of Hong Kong is in line with the sharp declines reported recently by Mainland China, Taiwan, Japan and Singapore, indicating a downward spiral and even tougher times ahead. Simultaneously, domestic demand has lost much of its momentum with weaker consumer and investor sentiments amid tighter credit market. Moreover, with the developed economies plunging into recession and the consequent waning of demand for products from emerging and developing economies, Hong Kong's exports dropped during 2008. In 2008, total exports of goods increased by mere 2% in real terms, a significant drop from the 7% increase in 2007, and registered a year-on-year decrease of 4.9% in the fourth quarter.

The Analyst Magazine, Global Financial Crisis, East Asian Financial Crisis, Severe Acute Respiratory Syndrome, SARS, Global Economy People's Republic of China, PRC, Economic Growth, Special Administration Region , SAR, Financial Turmoil, Global Recession, Fiscal Timidity.