Hong Kong has, not surprisingly, entered a technical recession. We can blame the US-China trade war and the ongoing demonstrations. With no end to the protests, the economy's future remains uncertain, writes Iris Pang – Economist Greater China at ING.
Key Quotes:
Hong Kong's economy contracted by 3.2% quarter-on-quarter in the third quarter of this year and is now in a technical recession. That's defined by two consecutive quarters of negative growth. It was widely expected due to the damage done by the trade war and anti-government protests. The economy shrank by 2.9% year-on-year in the third quarter after a positive growth of 0.5% YoY in 2Q19.
As the trade war is expected to linger well into 2020, and there seems to be no end to the violent protests, for the time being, Hong Kong's economy will continue to suffer from negative quarterly growth going into 2020. More companies will close, leading to a deterioration in employment. Without the protests, those affected by the trade stand-off might be expected to find jobs in the retail sector. But retailers are suffering too given the demonstrations, with redundancies and no paid leave commonplace.
The downturn in the jobs market will put extra pressure on retail sales which are already under pressure because of the loss of tourism and a decline in local consumption. We're expecting, therefore, negative quarterly growth for each quarter of 2020. And that's a real recession, not just a technical one.
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