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Protests hamper Hong Kong’s ability to benefit from coronavirus success
Hong Kong’s success in controlling the spread of the coronavirus is unlikely to result in a rapid recovery because the return of local protests and a global recession will hinder growth, economists said.
Standard Chartered downgraded its 2020 gross domestic product forecast for China to a contraction of 7.2 percent from a previous estimate of a 4.8 percent drop. Official figures showed that the city’s economy contracted 8.9 percent on-year in the first quarter.
Until a new case of Covid-19 was reported on Tuesday, the city had registered more than three weeks of absence of local infections, allowing the government to relax measures of social distancing and allow the reopening of companies such as bars.
The bank said a return to normal life would help sentiment, but warned that “the fact that Hong Kong, unlike other economies, never entered into a full shutdown means that the subsequent release of pent-up demand is unlikely to be strong. ”
In addition, the bank noted that pro-democracy protests have returned, albeit on a smaller scale, after a pause earlier in the year when residents focused on measures to control the spread of the virus.
“The return of local protests is likely to exacerbate an already weak domestic history after the coronavirus, where the unemployment rate and bankruptcy numbers will continue to rise for another quarter or two before peaking,” the Standard Chartered report said. . Second quarter GDP is forecast to drop 10.5 percent.
Iris Pang, chief economist of Greater China for ING, said that Hong Kong’s trade economy had been hit by the trade war and social unrest between the United States and China in 2019, sending it into a recession that deepened with the arrival of Covid-19.
Ms Pang predicts Hong Kong’s economy will contract 4.1 percent year-on-year in 2020, assuming the U.S.-China trade war remains under control.
Hong Kong’s appeal as a destination for Mainland Chinese tourists has evaporated thanks to social unrest, Pang said, which means that even if the city relaxes quarantine and travel restrictions soon, “tourists from Mainland China visit Hong Kong if the threat to personal security persists. “
Unemployment in tourism, local retail and catering rose to 6.8% at the end of March 2020, compared to the overall unemployment rate of 4.2%, he said.
