Hong Kong’s economic growth in the second quarter missed estimates as simmering unrest and the US-China trade war weighed on activity.
Gross domestic product contracted 0.3 per cent from the previous quarter, while growth on a year-ago basis remained at 0.6 per cent, according to data released on Wednesday. Both results were well below the estimates of economists surveyed by Bloomberg.
With the neighbouring Chinese economy slowing and global demand stuttering, Hong Kong’s trade-dependent economy was facing a full-year deceleration even before protests over the government’s extradition bill began to disrupt business and tourism in June.
There is “no room for optimism for the second quarter and the entire year”, according to a statement from Hong Kong’s government late on Tuesday that cited chief executive Carrie Lam’s remarks at a lunch for representatives of international and local chambers of commerce.
Mrs Lam said the territory’s economic momentum has weakened in recent months on the US-China trade war and other “uncertainties,” while pledging to “spare no efforts” to deal with anti-government protests that risk harming the city’s growth.
“Mrs Lam also said that the disputes in society in recent months are not conducive to Hong Kong’s continued development and that she would spare no efforts to deal with them,” according to the statement. “She pointed out that everyone should continue to have confidence in the city and she firmly believes that with the concerted efforts of various sectors, Hong Kong would find opportunities amid difficulties.”
Figures on Thursday may indicate retail sales dropped year-on-year for a fifth month in June, with demonstrations and the subsequent police crackdown deterring shopping and tourism.
“Carrie Lam says there is ‘no room for optimism’ on 2019 growth. We agree. Four important growth drivers for the former colony are exports, tourism, finance and property. On each of them, the signs are discouraging," said Tom Orlik, chief economist.
International companies are also feeling increasingly pessimistic about the city’s prospects, according to a survey of AmCham Hong Kong members.
“AmCham urges the government to stem any further damage and show clear leadership in meeting the expectations of Hong Kong people and in restoring the city’s international reputation for effective governance under the ‘one country, two systems’ framework,” AmCham president Tara Joseph said.
Small businesses in the city have also become much more pessimistic, with a sentiment index of small and medium companies dropping to the lowest in the seven years the survey has been conducted. The attitude of companies toward investment, sales, and profits all declined, as did all nine industry sub-indices, according to the results of the survey by Standard Chartered.
Tank warfare
Lt Gen Erik Petersen, deputy chief of programs, US Army, has argued it took a “three decade holiday” on modernising tanks.
“There clearly remains a significant armoured heavy ground manoeuvre threat in this world and maintaining a world class armoured force is absolutely vital,” the general said in London last week.
“We are developing next generation capabilities to compete with and deter adversaries to prevent opportunism or miscalculation, and, if necessary, defeat any foe decisively.”
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
Classification of skills
A worker is categorised as skilled by the MOHRE based on nine levels given in the International Standard Classification of Occupations (ISCO) issued by the International Labour Organisation.
A skilled worker would be someone at a professional level (levels 1 – 5) which includes managers, professionals, technicians and associate professionals, clerical support workers, and service and sales workers.
The worker must also have an attested educational certificate higher than secondary or an equivalent certification, and earn a monthly salary of at least Dh4,000.
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Mobile phone packages comparison
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
