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HONG KONG (China Daily / ANN): Hong Kong has plunged deep into recession with its economy registering its biggest quarterly decline on record, declining by almost 9 percent in the first three months of this year, exacerbated by the coronavirus pandemic .
The 8.9 percent annual decline in gross domestic product was the biggest decline since the government began tracking comparable data in 1974. The figure exceeds the city’s 8.3 percent contraction during the Asian financial crisis of 1998 and a 7.8 percent drop in early 2009, just after the global financial defeat.
It is also the third consecutive quarter that the local economy has declined, marking the longest stretch of recession since 2009.
According to government data released on Monday (May 4), the decline in GDP from January to March was mainly due to the continued weak performance of internal and external demand, as the Covid-19 crisis severely disrupted a wide range of Activities and economic offer of Hong Kong chains in the region.
“Our economic situation is very challenging. We are in a deep recession, “Financial Secretary Paul Chan Mo-po said Monday, noting that the economy had worsened in the third consecutive quarter.
The city’s economy began to shrink beginning in the third quarter of 2019 as social unrest increased. Recession is broadly defined as having negative economic growth for two consecutive quarters.
Chan said Hong Kong’s three engines of economic development – consumption, investment and exports – have stalled.
The drop in consumption widened sharply as people refrained from going out after the imposition of social distancing measures to curb the spread of the virus. Private consumption spending, believed to be a key factor in the contraction, fell 10.2 percent in the first three months of this year.
Investment general expenses also continued to contract sharply, amid gloomy business sentiment and slow construction activity.
Hong Kong’s total merchandise exports, at the same time, had a visibly expanded year-on-year drop in the first quarter, falling 9.7 percent, mainly affected by paralyzed regional supply chains and related business activities.
SAR is trying to recover as the threat of the coronavirus diminishes. As of Monday, the city had registered no locally transmitted Covid-19 infections for 15 straight days, with a count of 1,040.
There may be a relaxation of some of the social distancing regulations, including the lifting of the ban on public gatherings of more than four people, as well as the gradual reopening of companies.
However, Chan warned that the pandemic has not yet been fully controlled globally, and that this will continue to affect Hong Kong’s exports, international travel and commercial investment.
“In the future, for the second quarter, we believe that even if there is an improvement, it will be gradual and small,” he said, adding that he expects Hong Kong to gradually emerge from recession by the end of the year.
Liao Qun, chief economist at China CITIC Bank International, predicted that Hong Kong’s economy will drop another 4.5 percent in the second quarter and 2.5 percent in the third quarter. GDP growth is expected to turn positive in the last quarter with a 5 percent year-over-year increase.
He predicted the city’s GDP is likely to contract 2.8 percent for all of 2020. Chan had warned last week that the local economy would inevitably shrink by 4-7 percent this year.
To strengthen the affected companies and safeguard jobs, the SAR government has launched two rounds of economic stimulation under the Fund against the epidemic. Along with a massive package of countercyclical measures presented in the 2020-21 budget, total aid efforts cost HK $ 290 billion ($ 37.4 billion), equivalent to 9.5 percent of Hong Kong’s GDP.
Chan said the current stimulus package is quite considerable, with many of the initiatives planned yet to be implemented, and the government will initially focus on these measures. – China Daily / Asia News Network
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