Hong Kong’s economy recorded in the first quarter its deepest annual contraction since at least 1974, as the coronavirus pandemic dealt a heavy blow to business activity, already in decline following months of anti-government protest last year.
The economy contracted 8.9 percent on an annual basis, compared with a revised 3 percent in the fourth quarter of 2019. That was the steepest contraction for a single quarter since records began in 1974, the government said.
Seasonally adjusted gross domestic product (GDP) meanwhile shrank 5.3 percent in January-March from the previous quarter, versus a revised 0.5 percent decline in October-December, advance estimates showed on Monday.
The outbreak has killed four of Hong Kong’s 1,041 coronavirus patients, and largely put a brake on protests, while crushing tourism and keeping shoppers off the streets, hitting two key contributors to the GDP.
Although the city is slowly reopening its borders with mainland China and allowing business activity to resume, the global pandemic and anti-government protests could continue acting as a drag on the economy.
“Hong Kong’s epidemiological success means that social distancing may be less of a drag on consumption in the coming months. But any recovery will be tepid and held back by rising unemployment, which reached a decade high in March,” Julian Evans-Pritchard, a senior economist for China at Capital Economics, said in a note to clients seen by Al Jazeera.
“What’s more, tourism is likely to remain in the doldrums for a while and trade flows are set to weaken even further this quarter given the widening global shutdowns,” he said.
The Chinese-ruled city’s success in keeping the virus under control brings some hope of a tentative resumption of activity in coming months, but also fuels the prospect of renewed protest as anger against the government has not dissipated.
“Social distancing will continue to hurt catering and shopping, but another issue is … I believe there will be more protests over the summer holidays,” Iris Pang, Greater China economist at ING, told Reuters news agency.
It is also unlikely that consumers will have the appetite to spend, given the uncertainty over job prospects in an economy highly exposed to global trade and finance.
With most of the world still battling the virus, tourism is also unlikely to recover in the near term.
“Hong Kong’s near-term economic outlook is subject to very high uncertainties, hinging crucially on the evolving global public health and economic situations,” the government said in a statement accompanying the figures.
The government revised its GDP forecasts for this year to a contraction of 4 percent to 7 percent, from a previous estimate ranging from a decline of 1.5 percent to growth of 0.5 percent.
Financial relief measures for households and businesses are expected to push this year’s budget deficit to a record 276.6 billion Hong Kong dollars ($35.68bn), equivalent to 9.5 percent of the GDP.
Despite the relief measures, about a quarter of the Asian financial hub’s roughly 62,400 retail stores are expected to close by year-end, the Hong Kong Retail Management Association said last month.