Its Gross Domestic Product (GDP) declined 3.4 percent in the third quarter from a year earlier, the government said in a statement on Friday, compared to a nine percent drop in the second quarter.

The government attributed the moderate decline to an improved external environment led by the solid expansion of the Chinese mainland economy, some revival in sentiment in the latter part of the quarter amid the stabilization of the local epidemic situation, and stronger financial market activity.

"Considering the social unrest and COVID-19, a recession was clearly expected in Hong Kong. The improvement in the third quarter is also largely due to stimulus plans at social and economic levels, and especially the national security law promoting a stable situation," Deng Yu, senior research fellow of the Atlantis Financial Research Institute, told the Global Times on Friday.

Chen Bo, director of Digital Finance Research Center at the Central University of Finance and Economics, also told the Global Times that the macro environment is very favorable for Hong Kong's economy, and huge demand from the Chinese mainland has boosted its financial service sector.

Data shows that over the same period, total exports measured in national accounts terms recorded an increase of 3.8 percent in real terms over a year earlier, as against a drop of 2.2 percent in the second quarter.

The Hong Kong government also said that, looking ahead, the continued solid recovery of the mainland economy should provide support to Hong Kong's exports in the coming months. Also, global demand and trade flows will further improve if the recovery of the major advanced economies is sustained.

Hong Kong is among the reviving economies, as its neighbors have started to recover after months of contractions. Singapore's GDP in the third quarter rose by 7.9 percent from the quarter earlier, up from the 13.3 percent contraction in the second quarter, which was its worst quarter on record.

Hong Kong and Singapore have announced plans to create a travel bubble between the two cities next month, which would loosen travel restrictions and revive the economies.

However, judging from the current situation, the Hong Kong economy, having contracted for four consecutive quarters, has yet to emerge from the recession.

Hong Kong is trying to stimulate its economy, and the city has announced more than HK$310 billion in relief this year. But the year-long recession has led to uncertainties. Unemployment in September was at an almost 16-year high of 6.4 per cent. It is widely believed that the data could be higher after Cathay Pacific cut more than 5,000 jobs and closed a regional carrier last week.

Recovery will be slow and will depend on the resumption of people-to-people contacts with the mainland, and the possible outbreak of the coronavirus still leaves the future GDP unknown, Chen said on Friday.

Financial Secretary Paul Chan Mo-po said in a blog last week that if the smooth flow  of personnel and commerce between Hong Kong and the Chinese mainland can be restored,d Hong Kong's economy can still be "revitalized substantially."