Hong Kong’s economy was already in recession when the pandemic hit in January. Six months of fighting between pro-democracy activists and local authorities have deterred many visitors from feeding the lucrative tourism industry, while the threat of street violence and store closures has reduced retail sales by nearly a quarter from a year earlier.
As much of Asia was closed by restrictions on the coronavirus during the winter months, there was little expectation of recovery until spring, when infection rates dropped to almost zero in mainland China and most of the rest of the region and measures could be eased.
Some analysts expected the recovery to be strong. Hong Kong is a center for financial and professional services in competition with Singapore. Many workers could work from home and maintain the same level of activity.
But Hong Kong’s dependence on trade from India, the Philippines and the United States, where the virus continues to thrive, makes it more vulnerable to a second jump, and in the summer the cases start to rise again. The outbreak caused new restrictions on households and businesses and an immediate decline in business activity.
Last month, the territorial government said GDP fell 9% in the second quarter of this year, after falling 9.1% in the first quarter.
In May, the International Monetary Fund said it expected Hong Kong to recover in the second half of the year and predicted that its GDP would fall by only 4.8% in 2020.
Retail sales data coming out this week will give an idea of how long the recession will last and whether shopping is likely to recover, although widespread reluctance among Chinese consumers to spend the way they did in previous years is expected. to keep sales figures subdued.
A clearer picture has emerged for those involved in the financial industry, which remains Hong Kong’s largest business, as the stock market follows the same trajectory as the US to reach record highs this year.
However, analysts have worried in recent weeks that the summer rise in infections and the recent collapse in profits and the scandal over suspicious financial transfers to HSBC, which has a large presence in Hong Kong, could turn the market around. So far, the Hang Seng index has fallen to 23,275, rising to 26,669 in July.