The Hong Kong government is warning that six months of increasingly violent mass protests will cause the economy in the Asian financial hub to shrink this year.
A forecast published Friday by the government predicts Hong Kong’s economy will contract by 1.3% in 2019, marking the first year of recession since the global financial crisis a decade ago.
Hong Kong government economist Andrew Au said the forecast was slashed because of the pro-democracy protests, a synchronized global economic slowdown and trade tensions between China and the United States.
“Ending violence and restoring calm are pivotal to the recovery of the economy,” Au added in a statement.
Before the protests kicked off, Hong Kong’s government had predicted GDP growth this year of between 2% and 3%. In August, the administration downgraded its forecast, predicting annual growth between 0% and 1%.
But the economy slowed more dramatically that expected in the third quarter, pushing Hong Kong into its first recession since 2009. A recession is defined as two consecutive quarters of negative growth.
With no end to the political crisis in sight, Friday’s revised forecast confirms that the protests have left the city’s economy in worse shape than feared.
This week saw demonstrations that are normally confined to weekends spill over into weekdays, with protestors and riot police squaring off during working hours in the heart of Hong Kong’s financial district.
Mass demonstrations, which often take place in popular tourist areas, have hit the city’s shopping and tourism industry hard.
Despite the gloomy economic outlook, Hong Kong’s financial markets are getting a boost of confidence from tech giant Alibaba (BABA).
The Chinese e-commerce company said this week that it plans to raise as much as $13 billion in a secondary listing in Hong Kong. It would be the year’s biggest share sale so far, eclipsing Uber’s $8 billion IPO in March.
Alibaba chairman and CEO Daniel Zhang praised the beleaguered city in a letter to investors on Friday.
“During this time of ongoing change, we continue to believe that the future of Hong Kong remains bright,” he wrote. “We hope we can contribute, in our small way, and participate in the future of Hong Kong.”
— Laura He contributed to this story.