Already in an economic recession, Hong Kong now expects its COVID-19 battered economy to shrink anywhere from 6% to 8% for the full-year 2020.
The new estimate from the Census and Statistics Department Hong Kong compares to the previous projection for a contraction ranging from 4% and 7%. The downward revision follows a confirmation of data first made public on July 30 that Hong Kong's gross domestic product (GDP) for the second quarter had plunged by 9% year-on-year.
The confirmation Friday means Q2 is the fourth straight quarter of year-over-year decline in GDP. The economy shrank by an adjusted 9.1% in Q1.
The Q1 stumble was the worst quarterly result since 1974. It was also far worse than the negative 8.3% median forecast by a panel of economists.
"The Hong Kong economy remained very weak in the second quarter of 2020, as the COVID-19 pandemic continued to deal heavy blows to global and local economic activities," said Andrew Au, the government economist.
Au said the city's economic performance for 2020 as a whole might fall within the upper half of the range forecast if the current wave of local infection can be contained within a short time, and barring any further sharp deterioration in the economic situation of Hong Kong's trading partners.
In Q2, private consumption plummeted to - 14.2% from -10.6% in Q1. Gross domestic fixed capital formation fell to -21.4 from -15.8% in Q1.
Merchandise exports of goods fell 2.4% (compared to -9.7% in Q1) while imports dropped by 7.1% (vs. -11.1% in Q1). On the other hand, government spending ballooned by 9.8%, faster than the 8.8% expansion in Q1. On a quarter-on-quarter basis, Hong Kong's GDP shrank only 0.1% in Q2.
Last week, Hong Kong Financial Secretary Paul Chan said the city now faces "a bumpy road to recovery" and "hopes for an imminent recovery have been dashed." He said it might take somewhat longer than originally expected for the economy to recover.
The government of chief executive Carrie Lam, however, remains optimistic a strong recovery will appear later in the year. A government statement said the ongoing surge in COVID-19 cases has clouded the near-term outlook for Hong Kong's economic activity. Despite this, the Hong Kong economy hopefully will gradually recover in the rest of the year once the epidemic is contained again and the economic situation in other countries continues to improve.
The Q2 GDP downgrade to growth also came after a recent surge in COVID-19 cases. Hong Kong confirmed another 48 COVID-19 cases on Friday to bring its total to 4,360. It also has 67 deaths due to the disease.
Of the 48 new cases, 46 were locally transmitted. Thirty seven of these were linked to previous cases, indicating a widening community spread of the disease.
