Hong Kong Cuts Economic Forecast to Record Low on Virus
The Hong Kong government has revised its 2020 forecast for the city’s economy to a record low range of -6% to -8%.
(Bloomberg) -- The Hong Kong government has revised its 2020 forecast for the city’s economy to a record low range of -6% to -8% amid the global coronavirus pandemic and rising trade tensions.
The latest forecast is worse than the previous projection of -4% to -7%, according to a government statement Friday. The government also provided an unchanged final GDP reading for the second quarter of -9% on a year-on-year basis, and -0.1% from the prior quarter.
A decline to the upper end of the projected range would still surpass the previous record low contraction of -5.9% in 1998, according to data since at least 1962 compiled by Bloomberg. Hong Kong’s economy has also never posted consecutive years of economic decline, the data show.
“If the current wave of local infection can be contained within a short time and barring any further sharp deterioration in the external environment, economic performance for 2020 as a whole can hopefully fall within the upper half of the range forecast,” Andrew Au, the government economist, wrote in the report. “The tense China-U.S. relations and heightened geopolitical tensions also fuel uncertainties.”
The government also revised its forecast for headline inflation this year to 0.8% from 1.4%. The impact of a surge in pork prices since last May has largely dissipated and inflationary pressure is expected to ease further in the second half of the year amid subdued economic conditions, the government said.
Hong Kong’s recession deepened further this year as the virus sapped tourism demand and local consumption following months of political unrest. The city now faces multiple headwinds including a recent third wave of virus infections, as well as growing concern over its future as an Asian financial hub after Beijing’s imposition of a national security law.
Private consumption declined a record 14.2% in the second quarter from a year earlier, blamed on social distancing measures to control the spread of Covid-19, the government report said. Total exports of goods fell 2.4% in the quarter, while exports of services fell a record 46.1%.
The residential property market picked up, with the number of transactions rising 67% from the first quarter, though still down from the same period a year go.
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