Hong Kong’s economy declined precipitously during the third quarter of 2022, according to government estimates—marking the worst commercial period for the Chinese “special autonomous region” since the first months of the COVID-19 pandemic and suggesting that it would end the year with negative economic growth for the third time since 2019.

Hong Kong’s economic office estimated on Monday that its gross domestic product fell 4.5 percent from July to December when compared to the same period in 2021, an outcome far worse than the previous quarter’s 1.3 percent decline and an earlier 0.8 percent projected decline. It marked the third consecutive quarter of economic decline and the most pronounced drop since the second quarter of 2020, during which Hong Kong instituted widespread lockdowns and shuttered most businesses. Independent economists characterized the plunge as a consequence of Hong Kong’s ailing property sector, which has seen a pronounced drop in values as lockdowns have continued and interest rates remain high. Investment in the territory also reportedly declined by 14 percent during the third quarter of 2022, according to Bloomberg.

Hong Kong’s multifaceted economic woes come amid a series of ongoing restrictions on economic and social activity in an attempt to eradicate COVID-19 cases within the territory. These restrictions, as well as a crackdown on political dissent after massive pro-democracy protests in 2019, have prompted many wealthy Hongkongers to emigrate, including skilled workers contributing disproportionately to the economy. Hong Kong’s economy is also closely tied to mainland China’s, which has experienced a slump as Beijing has attempted to continue its “zero-COVID” lockdowns. Moreover, because the Hong Kong dollar is pegged to the U.S. dollar, it has appreciated against most other global currencies as the dollar has surged in strength, making the territory’s exports less competitive.

The government spokesman who announced the figures on Monday also noted that the activity they had recorded had taken place before the Hong Kong government lifted its most onerous COVID-19 restrictions, including its previous requirement that international travelers quarantine in a hotel prior to entry into the territory. The spokesman claimed that the abolition of these restrictions “should help exports of services,” although he acknowledged that the “markedly deteriorating external environment [would] continue to pose immense pressure on Hong Kong’s export performance in the remainder of the year.”

Hong Kong chief executive John Lee Ka-chiu cited the territory’s economic problems in a policy speech earlier in the month, indicating that he would combat them by attempting to stimulate the property market and urging expatriate Hongkongers to return. However, outside economists noted after Lee’s remarks that his proposals did not amount to major reform and would likely not solve the territory’s economic crisis on their own.

Trevor Filseth is a current and foreign affairs writer for the National Interest.

Image: Reuters.