Hong Kong has plunged into deep recession after its economy was hit by a double whammy of violent street protests and the US-China trade war.
Activity contracted by 3.2% in the three months to September as a loss of exports was compounded by a collapse in consumer spending and a loss of revenue from tourists.
Analysts said the third-quarter contraction – which followed a 0.5% drop in gross domestic product in the three months to June – would be the start of a prolonged slump that would cause permanent damage to Hong Kong’s reputation as a place to do business.
Two consecutive quarters of negative growth constitute a technical recession, but Iris Pang, China economist with ING bank, said the falls in GDP would continue throughout 2020. “That’s a real recession, not just a technical one,” she said.
Protracted anti-government street protests have seen tourist arrivals to Hong Kong drop by a third, and with shops shuttered and roads blocked, retail sales have plummeted. Business confidence has been affected and investment has dried up.
The 3.2% quarterly drop – almost on a par with the worst quarter during the slump triggered by the 2008 financial crisis – meant Hong Kong’s annual growth rate fell from +0.5% to – 2.9%.
Julian Evans-Pritchard, senior China economist at Capital Economics, said: “The near-term outlook remains downbeat. Shipments through the city are likely to shrink further in the coming months as the global economy continues to cool. And disruption from the protests worsened at the start of this quarter with no immediate resolution in sight. As a result, Hong Kong’s GDP will probably continue to contract in the fourth quarter.
“The political crisis has done lasting damage to Hong Kong’s reputation as a stable, autonomous financial hub.”