A woman wearing a protective mask in Hong Kong.
Anthony Kwan l Getty Images
Some economists have lowered their economic forecasts for Hong Kong, as the semi-autonomous Chinese territory has extensive experience of coronavirus cases.
The trend in numbers forced authorities to impose stricter measures on social distancing this week.
Hong Kong said Wednesday that preliminary estimates showed its economy had shrunk by 9% in the second quarter compared to a year earlier. This is the fourth consecutive quarter of the city in contraction from year to year, according to official data.
The government said in a statement that the pandemic remains “a major threat”; to the global economy and a renewed outbreak in the country “deceived the near-term outlook for domestic economic activity”.
“However, once the local epidemic is contained again and the external environment continues to improve, the Hong Kong economy hopes to gradually recover over the rest of the year,” she added.
Economists agreed that stricter measures of social distancing imposed after a recent flare-up on occasions would hurt any economic momentum. But some do not share the government’s view that a recovery could come this year.
Impact of stricter coronavirus measures
Economists consulting Capital Economics forecast an 8% contraction in the Hong Kong economy this year – close to doubling their previous projection for a 4.5% contraction.
The latest Capital Economics review below is also worse than the government’s official forecast for a 4% to 7% contraction in 2020.
“Until a few weeks ago, the Hong Kong economy seemed determined to start recovering this quarter,” economists said in a note Wednesday, pointing to Hong Kong $ 10,000 ($ 1,290) government money deliveries that seemed determined to help boost economic activity after being disbursed earlier this month.
But tighter control measures could “delay consumer recovery, and put additional pressure on employment and income, reducing the incentive from government money sheets,” they added.
In addition to Economic Capital, Citi also lowered its forecast for Hong Kong and forecast a full economic contraction of 6.3% compared to 5.5% previously.
Iris Pang, chief economist for Greater China at Dutch bank ING, expects the new social distancing measures to remain in place for some time as previous easing of restrictions may have contributed to the newest jump in cases.
Pang said in a note Wednesday that she expects Hong Kong’s economy to shrink by 10% in the third quarter and 5% in the fourth quarter – bringing the full year-round contraction to 8.3%.
“Covid-19 cases have increased in Hong Kong, and there may be many sources that are difficult to trace,” she said. “The government has strengthened further measures of social distancing again since the outbreak, which the health department claimed may have been due to the previous relaxation of social distancing measures.”
Hong Kong leader Carrie Lam warned this week that the renewed blast could overwhelm the city’s healthcare facilities and cost lives. New measures imposed in the city include banning the gathering of more than two people and restrictions on dinner services.
But some economists said Hong Kong’s poor economic performance last year could help the city record better gross domestic product numbers in the second half of this year.
The economy contracted in the third and fourth quarters of last year, shrinking from the US-China trade war and widespread pro-democracy protests.
Gary Ng, an economist at French investment bank Natixis, told CNBC’s “Squawk Box Asia” on Thursday that the economy could “take” from the second quarter to record a 5% to 6% contraction in the second half of by 2020. This would bring year-round contractions to around 7%, he added.
“In the second half of the year, I expect more fiscal measures targeting industries – especially retail, hospitality, accommodation, and construction – to be implemented,” he said, explaining that those sectors are a “main driver”. current escalating unemployment rate “.