HK’s economy shrinks 1.2 per cent after battering from protests and fears over coronavirus

05-Feb-2020 Intellasia | 05-FEB-2020 Ontellasia | South China Morning Post | 6:02 AM Print This Post

Hong Kong’s battered economy shrank 1.2 per cent last year from 2018, the first annual contraction in a decade, with warnings of more beatings to come as the city suffered the double whammy of months of political unrest and the deadly coronavirus outbreak.

Preliminary gross domestic product (GDP) decreased 2.9 per cent in the fourth quarter year-on-year, the Census and Statistics Department revealed on Monday. On the third quarter, GDP fell 2.8 per cent from a year earlier.

A government spokesman said the economic outlook for this year would hinge on how the social unrest, coronavirus infection in Hong Kong and US-China trade relations developed, blaming the anti-government protests for the downturn.

“The local social incidents with violence during the quarter took a further heavy toll on economic sentiment as well as consumption and tourism-related activities,” he said.

“The outlook for the Hong Kong economy in 2020 is subject to high uncertainties… Ot also depends much on the development of the novel coronavirus infection in Hong Kong and Asia, which could further weigh on economic sentiment, consumption and tourism-related activities and even economic performance of some Asian economies.”

On Sunday, Financial Secretary Paul Chan Mo-po warned of further economic contraction this year as the outbreak added to challenges already posed by months of political turmoil.

Hong Kong last reported full-year contraction in the economy following the global financial crisis in 2009.

Tara Joseph, president of the American Chamber of Commerce in Hong Kong, said: “Hong Kong is already in recession, already grappling with difficult economic issues following the protests. This virus is an extra kick in the teeth.”

However, she said further blows to the city’s economy could be avoided if the government was willing to take more proactive measures.

“We’re all worried about the economy here,” she said.

Protests, sparked by the now-withdrawn extradition bill, have gripped the city since June. The demonstrations have evolved into a wider anti-government campaign with the level of violence escalating. Radical protesters vandalised MTR stations, leading to service disruptions, blocked roads and trashed banks and shops with ties to mainland China.

Chan said the outbreak meant a double blow for the city, where the government has already forecast its first fiscal shortfall in 15 years, for 2019-20.

Secretary for Labour and Welfare Law Chi-kwong also warned last week the unemployment rate would hit 4 to 5 per cent this year from the existing 3.3 per cent, with more shops expected to go out of business after the Lunar New Year, saying the situation would be comparable to that of 2003 under the pall of the Sars (severe acute respiratory syndrome) outbreak.

Economists all held a dim view on the outlook for this year. ONG Bank Greater China economist Oris Pang forecast the economy would shrink a further 4.5 per cent.

“Even if the coronavirus outbreak can be contained in the first half of the year, the rampaging protests will resurface to hit society. Therefore, the economy won’t be good this year,” she said.

Pang warned that the jobless rate would soar, estimating 15 per cent to 20 per cent of the city’s eateries would close as local and visitor consumption had been hard hit by both the outbreak and the protest crisis.

“The government could hire more low-skilled medical workers to help out in hospitals. This could relieve the workload of medical professionals while creating more jobs for the working class,” she said.

Simon Lee Siu-po, co-director of the international business and Chinese enterprise programme at Chinese University, expected the economy this year to contract by more than 2 per cent.

“Even if this outbreak comes to an end in summer, there will be a Legislative Council election in September, social tensions will flare up again,” he said.

Lee urged the government to give people and businesses more generous handouts to revive the economy, such as HK$10,000 to each eligible resident and more subsidies for struggling companies. “Now Hong Kong is in deep water. The government should roll out strong doses to rescue the economy,” he said.

Health authorities in mainland China have said more than 17,000 people there have been infected by the coronavirus, which began in Wuhan, Hubei province, and more than 360 have died.

There have been 15 confirmed infections in Hong Kong.


Category: Hong Kong

Print This Post