Woman wearing a protective mask in Hong Kong.
Anthony Kwan l Getty Images
Several economists have lowered their economic forecasts for Hong Kong as China’s semi-autonomous territory has experienced a surge in coronavirus cases.
The problem of numbers has forced the authorities to tighten measures on social distance this week.
Hong Kong said on Wednesday that preliminary estimates put the economy down 9% in the second quarter from a year ago. This is the official fourth quarter in a row in the city for the year, according to official data.
The government said in a statement that the pandemic remained a “key threat”; to the world economy, and the renewed outbreak at the local level “overshadowed the immediate prospects for domestic economic activity.”
“However, when the local epidemic stops again and the external environment continues to improve, the Hong Kong economy will hopefully gradually recover over the rest of the year,” he added.
Economists have agreed that tougher measures of social distance, introduced after the recent outbreak of business, will blunt any economic moment. But some do not share the government’s view that recovery could come this year.
Influence of stricter coronavirus measures
Economists in a consultation with Capital Economics predict that this year’s reduction in the Hong Kong economy by 8% – is almost twice the previous forecast of 4.5%.
The latest revision of the decline in the capital economy is also worse than the government’s official forecast for a reduction of 4 to 7% in 2020.
“Until a few weeks ago, Hong Kong’s economy looked ready to begin recovering this quarter,” economists said in a note Wednesday, pointing to the distribution of $ 10,000 ($ 1,290) in government money, which seems to have helped boost economic activity after paid earlier this month.
However, tougher containment measures could “delay the resumption of consumption and put additional pressure on employment and income, slowing down the growth of government money distributions,” they added.
In addition to the capital economy, Citi also lowered its forecast for Hong Kong and forecast an economic decline of 6.3% compared to 5.5% earlier.
Iris Pang, chief economist from Greater China at Dutch bank ING, expects that the new measures aimed at removing social power will remain for some time, as the previous reduction of restrictions could contribute to the latest jump in business.
In a note on Wednesday, Pang said she expects Hong Kong’s economy to shrink by 10% in the third quarter and by 5% in the fourth quarter, leading to a 8.3% year-over-year decline.
“Covid-19 cases have increased in Hong Kong, and there may be many sources that are difficult to track,” she said. “Since the outbreak, the government has re-intensified further social exclusion measures, which, according to the health department, may be the result of a previous easing of social exclusion measures.”
This week, Hong Kong leader Kerry Lam warned that a renewed outbreak could overwhelm the city’s medical facilities and cost lives. New measures introduced in the city include a ban on gathering more than two people and restricting lunch services.
But some economists believe Hong Kong’s weak economic performance last year could help the city achieve better gross domestic product in the second half of this year.
The economy contracted in the third and fourth quarters of last year, plagued by the US-China trade war and widespread pro-democracy protests.
Gary Ng, an economist at French investment bank Natixis, said on Thursday on CNBC’s Squawk Box Asia that the economy could “climb” from the second quarter to register a 5% to 6% reduction in the second half of 2020. This would reduce the year-round reduction to about 7%, he added.
“In the second half of the year, I expect more fiscal measures focused on the industry, including retail, catering, construction, and construction,” he said, explaining that these sectors are a “key driver” of the current escalation rate. unemployment “.