A woman wearing a protective mask in Hong Kong.
Anthony Kwan l Getty Images
Several economists have lowered their economic forecasts for Hong Kong as semi-autonomous Chinese territory has seen a sharp increase in coronavirus cases.
The increase in the number forced the authorities to introduce stricter measures to distance themselves into society this week.
Hong Kong said on Wednesday that preliminary estimates showed that its economy contracted by 9% in the second quarter compared to the previous year. According to official data, this is the fourth quarter in a row, which is declining year on year.
The government said in a statement that the pandemic remained a “key threat”; to the global economy and that a renewed focus at the local level “obscured the outlook for domestic economic activity.”
“However, if the local epidemic is reduced again and the external environment continues to improve, Hong Kong’s economy will hopefully gradually recover for the rest of the year,” she added.
Economists agree that the more stringent social distance measures introduced since the recent outbreak have dampened any economic impetus in cases. However, some disagree with the government’s view that a recovery could come this year.
Impact of stricter measures against coronaviruses
Capital Economics economists predict an 8% decline in the Hong Kong economy this year – almost doubling their previous projection to a 4.5% decline.
The latest downward revision in Capital Economics is worse than the government’s official forecast of a 4% to 7% reduction in 2020.
“It wasn’t until a few weeks ago that Hong Kong’s economy began to recover this quarter,” economists said in a note on Wednesday, pointing to government treasury bills of $ 10,000 ($ 1,290) to help boost economic activity after paying off earlier this year. month.
However, tighter measures to curb could “delay the recovery in consumption and put further pressure on employment and revenue, thus mitigating the recovery in government money disparities,” they added.
In addition to the capital economy, Citi also lowered its forecast for Hong Kong and forecast a full-year economic decline of 6.3%, compared to 5.5% earlier.
Iris Pang, the chief economist for Greater China at the Dutch bank ING, expects the new social distance measures to remain in place for some time, as previous easing of restrictions may in some cases have contributed to the latest leap.
Pang said in a report on Wednesday that she expects Hong Kong’s economy to contract by 10% in the third quarter and 5% in the fourth quarter, reducing the annual decline to 8.3%.
“The Covid-19 cases have increased in Hong Kong and there are many sources that are difficult to identify,” she said. “Since the outbreak, the government has tightened up further measures on social distance, which it claimed that the health department could be the result of a previous relaxation of social distance measures.”
Hong Kong leader Carrie Lam warned this week that a renewed outbreak could overwhelm the city’s medical facilities and the cost of living. New measures imposed in the city include a ban on gathering more than two people and restrictions on dinner.
However, some economists said that Hong Kong’s weak economic performance last year could help the city publish better gross domestic products in the second half of this year.
The economy contracted last year in the third and fourth quarters, weighed down by the US-China trade war and widespread pro-democracy protests.
Gary Ng, an economist at the French investment bank Natixis, told CNBC’s Squawk Box Asia on Thursday that the economy could “recover” from the second quarter to decline by 5% to 6% in the second half of 2020. he added that the full-year decline should reach around 7%.
“In the second half of the year, I expect more fiscal measures to be targeted at industries – especially retail, catering, housing and construction,” he said, explaining that these sectors are “the key driver of the current rising unemployment rate.” ‘ ”