Protests hamper Hong Kong’s ability to profit from coronavirus success
Hong Kong’s success in controlling the spread of coronavirus is unlikely to result in a quick recovery because a return of local protests and a global recession will hamper growth, economists said.
Standard Chartered downgraded its 2020 gross domestic product forecast for the Chinese territory to a contraction of 7.2 per cent against an earlier estimate of 4.8 per cent fall. Official figures showed the city’s economy contracted by 8.9 per cent year on year in the first quarter.
Until a new Covid-19 case was reported on Tuesday, the city had recorded more than three weeks of no local infections, allowing the government to relax social distancing measures and allow businesses such as bars to reopen.
The bank said the return to normal life would help sentiment, but warned “the fact that Hong Kong, unlike some other economies, never entered full lockdown means that the subsequent release of pent-up demand is unlikely to be strong”.
In addition the bank pointed out that pro-democracy protests have returned, albeit on a smaller scale, after a lull at the beginning of the year when residents were focused on measures to control the spread of the virus.
“The return of local protests is likely to exacerbate an already weak post-coronavirus domestic story, where the unemployment rate and bankruptcy numbers are set to continue climbing for another quarter or two before peaking,” the Standard Chartered report said. It forecasts second-quarter GDP will fall by 10.5 per cent.
Iris Pang, chief economist, greater China for ING, said the Hong Kong economy had been hit by the US-China trade war and social unrest in 2019, sending it into a recession that deepened with the arrival of Covid-19.
Ms Pang forecasts the Hong Kong economy will contract by 4.1 per cent year on year in 2020, assuming the trade war between the US and China remains in check.
Hong Kong’s appeal as a destination for mainland Chinese tourists has evaporated thanks to the social unrest, Ms Pang said, meaning that even if the city relaxes quarantine and travel restrictions soon “mainland tourists are unlikely to visit Hong Kong if the threat to personal security persists”.
Unemployment in tourism, local retail and catering rose to 6.8 per cent at the end of March 2020, against the overall unemployment rate of 4.2 per cent, she said.