Hong Kong Revises 2Q GDP Growth Down as Protests Hit Activity
Hong Kong’s economy contracted more than estimated in the second quarter, as brewing unrest in the city began to damp activity.
(Bloomberg) --
Hong Kong’s economy contracted more than originally estimated in the second quarter, as brewing unrest in the city began to damp activity.
Gross domestic product contracted by 0.4% in the three months to June from the previous quarter, more than the 0.3% contraction in the first estimate of the data released on July 31, the government said in a statement. From a year earlier, output growth slowed to 0.5% against the previous estimate of 0.6%.
Large-scale demonstrations and confrontations between police and protesters began in June, and have escalated in the weeks since then, bringing the city into its gravest political crisis in decades. Business confidence, retail sales, and tourism have suffered from the turmoil, adding to the downward pressure already evident from the U.S.-China trade war and a slowing global economy.
On Thursday, the government announced a stimulus package worth more than $2 billion and said the economy will struggle to grow at all this year amid the ongoing political unrest. Gross domestic product will expand by 0% to 1% this year, Financial Secretary Paul Chan said Thursday, revising down the previous forecast of 2% to 3%.
“The recent local social incidents, if continued, will cause significant disruptions to inbound tourism and consumption-related economic activities, further dampen economic sentiment, and even hurt the reputation of Hong Kong as an international financial and business centre,” the government said. “Latest surveys for large enterprises and small-and-medium-sized enterprises all showed that local business sentiment has turned pessimistic in recent months.”
The government also revised its forecasts for underlying and headline consumer price inflation to 2.7% and 2.6% respectively, both from 2.5%. One of the main drivers was a surge in pork prices due to supply disruptions in May and June that will likely keep costs elevated “for some time” until fresh pork supply returns to normal, the statement said.
On Thursday, Chan announced fiscal support measures, led by an increase in the amount of personal income that’s tax free, a measure estimated to cost HK$1.84 billion ($235 million) and benefit 1.4 million people. The total value of the new measures is HK$19.1 billion, Chan said.
At the same time, economists said the city will need more fiscal support, particularly if the protests endure or violence escalates.
What Bloomberg’s Economists Say
“The stimulus measures will provide only modest support and the economy is still likely to experience a substantial slowdown. The fiscal package will offer little help in reversing the decline in visitors to Hong Kong. While the proposed tax cut could help lift household income, it won’t lead to a meaningful lift in consumer confidence.”
Qian Wan, economist
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To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Jiyeun Lee
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