The Standard Chartered GBA Business Confidence Index saw the first quarterly decline since its launch in the second quarter of 2020, due to the resurgence of the COVID-19 pandemic. Analysts said that although there may be downside risks to the index, they believed the central government will introduce measures to contain the situation.

The GBAI fell to 52.7 in the third quarter of this year from 58.7 in the previous quarter, according to GBAI survey results released on Monday.

As the Greater Bay Area survey was conducted between late July and mid-September, the Evergrande debt problem and the shortage of electricity were largely not reflected in the results, so Kelvin Lau Kin-hang, Standard Chartered Hong Kong's senior economist for greater China, said he expected that there will be a downside risk to the index in the fourth quarter.

Nicholas Kwan Ka-ming, director of research at the Hong Kong Trade Development Council, said that the central government is expected to encourage a ramping up of short-term coal production while allowing increased coal imports to limit the risk of downward economic growth due to a shortage of electricity supply.

The GBAI gauges business confidence based on quarterly surveys of more than 1,000 companies operating in the Guangdong-Hong Kong-Macao Greater Bay Area. The surveys are conducted by the Hong Kong Trade Development Council in collaboration with Standard Chartered.

The index comprises two main business indexes－one gauging "current performance" and the other looking at "expectations". A reading of 50 is considered neutral, with optimism and pessimism respectively reflected in scores above or below 50.

In terms of the fourth-quarter outlook, most respondents identified rising financing costs, weak demand and tighter regulation as potential risks. Lau said power shortages on the Chinese mainland might affect the production progress of the manufacturing sector, exposing the GBAI to downside risks.

Economic growth in the Greater Bay Area slowed due to the resurgence of the pandemic, but the decline was mild compared with the overall decline on the Chinese mainland, with six of the eight business index components and subcomponents remaining above the neutral line of 50, Lau said.

However, the current performance index in Hong Kong was 47.6, while the expectations index was 56.4, both of which were lower than other cities in the region.

This performance was largely influenced by Hong Kong's sluggish control of the pandemic and the fact that, as a service-oriented economy, Hong Kong has not benefited from the rebound in the manufacturing sector, Lau said.

Hong Kong's lag in these indexes has actually improved over time, Lau said. Nonetheless, he said he expected that pandemic-related measures will continue to limit Hong Kong's economic recovery.