HONG Kong's exports fell in September for the first time in almost two years, and the city government warned the outlook is "bleak," adding to risks the city will enter a recession.

Overseas shipments fell 3 percent from a year earlier to HK$271.8 billion (US$35 billion), the government said in a release on its website yesterday. That compared with a 6.8 percent gain in August. Exports last dropped in October 2009.

Higher unemployment in the United States and Europe's debt crisis are damping economic expansion in the city by weakening overseas demand, Financial Secretary John Tsang said on October 16. Trade through Hong Kong is also being hurt by moderating growth on the Chinese mainland. Exports to the mainland, the biggest destination for shipments via Hong Kong, fell 7.3 percent annually last month.

"A prolonged period of low growth in the West, together with a soft landing in China, could mean further downside risk to export growth in the coming months," Kelvin Lau, an economist at Standard Chartered Plc in Hong Kong, said before the release. "This should translate into a bigger drag on overall economic growth."

The median estimate of 10 economists in a Bloomberg News survey was for a 6.5 percent boost in exports. None of the economists forecast a decline.

Imports rose 2.3 percent in September from a year earlier, the smallest gain since growth resumed in November 2009 after a yearlong decline during the financial crisis. September's trade deficit was HK$40 billion, the government said.

The outlook for overseas shipments in coming months is "bleak," the government said in the release, citing the deepening sovereign debt crisis in the euro area and a stalling recovery in advanced economies.

"Although some Asian markets still held up relatively well, the impact of weaker demand from the West on regional trade flows has turned more evident of late," it said.