Hong Kong slides into recession in 2019, worst yet to come

HONG KONG: Hong Kong’s economy contracted for the first time in a decade in 2019 as violent antigovernment protests and trade tariffs between the US and China took more steam out of the economy in the final quarter of last year.

The worst is yet to come, with no end in sight to the protests in the city and a new coronavirus outbreak in mainland China.

“The coronavirus outbreak will probably keep the city in recession for a while longer,” said Martin Rasmussen, China economist at Capital Economics.

Hong Kong, which has so far seen 15 confirmed cases of the virus, has taken measures to reduce the flow of visitors from China where the death toll has risen to 361. The city’s retail and tourism sectors rely heavily on spenders from the Chinese mainland.

The economy shrank by a seasonally adjusted 0.4% in October-December from the previous quarter, versus a revised 3.0% contraction in July-September. On an annual basis, the economy shrank 2.9%, compared with a revised 2.8% fall in the third quarter.

For the whole of 2019, real gross domestic product (GDP) contracted by 1.2%, the first annual decline since 2009.

“The coronavirus is grabbing the headlines, but the protests haven’t gone away,” said Iris Pang, Greater China economist at ING, who expects the economy to contract by 4.5% this year and return to mild growth in 202 if the virus is contained. Retail, catering, tourism, mass transport are all suffering.”

ANZ analysts predicted a 1.4 percentage point negative impact on Hong Kong’s first quarter GDP from the effects of the virus, making it the worst hit region in Asia outside mainland China.

Capital Economics expects the virus to shave off 2 percentage points off Hong Kong’s first quarter growth.

In November, the most recent data available, retail sales fell for a 10th consecutive month by 23.6% year on year.

Tourist arrivals dived by an annual 55.9% in November, their steepest fall since May 2003, when the city was hit by an outbreak of Severe Acute Respiratory Syndrome. – Reuters