Hong Kong authorities on Friday further cut the city's GDP forecast for the year, saying that economic growth could slip into negative territory.
The SAR's growth forecast has been amended to a range of between a contraction of 0.5 percent and growth of 0.5 percent, down from the previous range of one to two percent growth. It is the second time the administration has revised its forecast figures in three months.
Government economist Adolph Leung told a press conference that economic performance in the first half of the year was worse than expected.
He added that global economic prospects have deteriorated sharply and this will weigh heavily on Hong Kong's export performance in the remainder of the year.
But the official said local consumption should pick up in the second half and boost the economy, and the recent relaxation of quarantine arrangements for inbound visitors should also help.
"Domestically, economic activities should revive further provided that the local epidemic situation remains under control. The consumption voucher scheme will continue to support consumption demand," he said.
"But tighter financial conditions may have some dampening effect on consumer sentiment and spending. Rising borrowing costs may also make businesses more cautious in undertaking fixed asset investment."
Meanwhile, the administration revised the second quarter GDP to negative 1.3 percent on a year-on-year basis, a slight improvement from the initial estimate of a 1.4 percent contraction.
Leung was asked if Hong Kong was in a technical recession, as the city was recording negative growth for the second quarter in a row, following on from a negative 3.9 percent performance in the first quarter.
"Yes, we recorded two quarters of year-on-year contraction, but if you look at the quarter-to-quarter change, in fact, we recorded an expansion in the second quarter," he said, referring to the one percent growth compared to the three months to March.
"So in fact the economy is improving, and we're also expecting that the economic growth in the second half will accelerate, so I don't really think this is a recession scenario."