Hong Kong reported the worst first-quarter GDP number in its history -- an unprecedented 8.9% contraction year-on-year -- while also forecasting an economy set to shrink by up to 7% for the full year.
The fall is the third straight quarter where Hong Kong's economy hasn't grown, making it the deepest recession stretch since 2009. Already in recession, Hong Kong's bruised economy shriveled by 3% in Q4 2019 and 1.2% for the full year as exports, investment and private consumption plumbed historic lows.
All this bad news on account of the raging COVID-19 pandemic atop the economic damage inflicted by the extended pro-democracy street protests that dominated most of 2019. The raging economic slump "is worrying," said Hong Kong Financial Secretary Paul Chan Sunday. Chan said this year might be the worst for Hong Kong's economy since it started keeping annual records.
The Q1 2020 GDP crash exceeds both the 8.3% reduction during the Asian financial crisis of 1998 and the 7.8% drop in early 2009 following the Great Recession of 2008.
"The threat of Covid-19 seriously disrupted a wide range of local economic activities and supply chains in the region," said the government in a statement. "With the disease evolving into a pandemic in March, the economic fallout became even more severe."
The statement also said the 8.9% plunge "was the largest decline on record since the reference period of the first quarter of 1974" when the government began tracking comparable data.
The statement said the economic recession deepened in the first quarter of this year with Covid-19 seriously disrupting a wide range of economic activities and global supply chains. It said the economic fallout worsened when COVID-19 became a pandemic in March.
Before the release of the GDP data Monday, Hong Kong's benchmark Hang Seng Index plummeted 4.2%, its worst day since the middle of March. Investors fled amid renewed trade tensions between the United States and China and its impact on the already battered economy.
Hong Kong's GDP in 2019 fell 1.2% as massive pro-democracy protests wracked the city for most of the year, paralyzing business and scaring away tourists that are among the economy's main growth drivers. Analysts were confident the fading away of the pro-democracy protests by year-end would trigger a sharp V-shaped recovery. Then, COVID-19 appeared and transformed a manageable economic downturn into a record-setting plunge with no immediate solution in sight save for a slow return to "normalcy." Worse, COVID-19 crushed any hope for a near-term recovery.
"Looking ahead, with the COVID-19 pandemic causing a severe contraction of global economic activity, Hong Kong's exports will remain under notable pressure in the near term," said the government.
The government remains optimistic of riding out the COVID-19 storm and reiterated its forecast of a 4% to 7% contraction for Hong Kong's economy in 2020.
