In Hong Kong, a woman wears a protective mask.
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Several economists have downgraded Hong Kong’s economic forecasts because of the high incidence of coronavirus in semi-autonomous China.
The increase has forced the authorities to impose tougher measures on the public this week.
Hong Kong said on Wednesday that preliminary estimates showed its economy shrank 9% in the second quarter from a year ago. According to official data, this is the fourth consecutive quarter of the city compared to each year.
The government said in a statement that the pandemic remained a “major threat”; to the global economy and that the renewed outbreak on the spot “darkened the country’s short-term economic prospects”.
“Nevertheless, with the re-emergence of the local epidemic and the continued improvement in the external environment, Hong Kong’s economy is expected to recover gradually over the rest of the year,” he added.
Economists have agreed that tougher measures of social isolation introduced after the recent escalation will ease any economic stimulus. However, some disagree with the government’s view that it could recover this year.
Effects of more severe coronavirus measures
Capital Economics consulting economists forecast that Hong Kong’s economy will shrink by 8% this year, almost twice as much as their previous forecast of 4.5%.
The latest downward revision of Capital Economics is also worse than the government’s official forecast for 2020. Will decrease from 4% to 7%.
“Until a few weeks ago, Hong Kong’s economy seemed to start recovering this quarter,” economists said in a statement on Wednesday, noting the government’s $ 10,000 ($ 1,290) in government spending, which appears to have helped boost economic activity after a previous payout. this month.
However, tighter containment measures could “delay the recovery in consumption and put additional pressure on employment and incomes by easing the government’s cash distribution,” they added.
In addition to Capital Economics, Citi has also lowered its forecast for Hong Kong and forecast that the economy will shrink by 6.3% year-on-year, up from 5.5% previously.
Iris Pang, chief economist at Greater Holland Bank ING, hopes that the new measures of social isolation will persist for some time to come, as previous easing of restrictions may have contributed to the recent jump in cases.
In a statement on Wednesday, Pang said it expects Hong Kong’s economy to shrink by 10 percent in the third quarter and by 5 percent in the fourth quarter, bringing the full-year contraction to 8.3 percent.
“Covid-19 cases have increased in Hong Kong, so there may be many sources that are difficult to trace,” she said. “Since the outbreak, the government has once again tightened measures of social isolation, which, according to the Department of Health, may have been driven by previous easing of social isolation measures.”
Hong Kong leader Carrie Lam warned this week that the renewed outbreak could overwhelm the city’s health facilities and cost lives. New measures introduced in the city include a ban on gathering more than two people and restrictions on canteen services.
But some economists have argued that Hong Kong’s weak economic performance last year could help the city announce better GDP figures in the second half of this year.
The economy contracted in the third and fourth quarters of last year, weakened by the U.S.-China trade war and widespread democratic propaganda protests.
Gary Ng, an economist at French investment bank Natixis, told CNBC Squawk Box Asia on Thursday that the economy could “accelerate” from the second quarter and record a 5-6% contraction in 2020. On the other side. he adds that it will fall by about 7% a year, he added.
“In the second half of the year, I hope that more fiscal measures will be needed for industries – especially retail, catering, accommodation and construction,” he said, explaining that these sectors are “the main current rise in unemployment”.