The coronavirus pandemic has forced Hong Kong into an even deeper recession. And it may take longer than expected to recover.
The Asian financial hub’s economy shrank 9% in the three months through June, compared to the same period a year earlier, according to preliminary figures released by the government Wednesday.
It was the city’s fourth consecutive quarter of contraction. Hong Kong had already fallen into recession last year — its first in a decade — because of months of anti-government protests and the US-China trade war.
Despite last quarter’s terrible showing, the news could have been even worse: The plunge in Hong Kong’s GDP at least appears to be holding steady. Revised figures show that the economy also shrank about 9% in the first quarter of 2020, worse than initially reported.
“Hong Kong’s economy stabilized last quarter as fiscal stimulus and stronger demand in mainland China offset weaker consumption and investment,” wrote Martin Rasmussen, China economist for Capital Economics, in a research note Wednesday.
The coronavirus pandemic was also largely under control in Hong Kong through much of the second quarter. But with the city now facing its worst outbreak of Covid-19 yet, “hopes for an imminent recovery have been dashed,” Rasmussen added. Cases have been surging with hundreds being reported recently. In response, the city has restricted gatherings, closed some venues and barred dining-in at restaurants, among other measures.
Hong Kong faces “a bumpy road to recovery,” Hong Kong Financial Secretary Paul Chan wrote in a blog post Sunday.
The Covid-19 pandemic and worsening China-US relation have added uncertainty to the global economic outlook. Hong Kong has become the latest flashpoint in the dispute between the world’s biggest economies after Beijing imposed a national security law on the city at the start of July.
“Together with the recent recurrence of the local epidemic, [these factors] suggest that it may take longer than originally expected for the local economy to recover,” Chan said.