The novel coronavirus outbreak has posed a double whammy for Hong Kong’s economy that’s already in a recession after being battered by months of social unrest, economists said.
“The virus outbreak has cast a cloud over an anticipated trade recovery and presented additional risks to an already lackluster economy,” said Yao Aidan, a senior emerging Asia economist at AXA Investment Managers.
At the beginning of this year, we thought the social unrest had de-escalated and there would be a sort of recovery. However, the epidemic has continued to suppress the Hong Kong economy
Samuel Tse Ka-hei,
an economist and senior associate at DBS Group
Samuel Tse Ka-hei, an economist and senior associate at DBS Group, told China Daily the epidemic has severely affected almost all industries, especially the retail, tourism and trade sectors.
“At the beginning of this year, we thought the social unrest had de-escalated and there would be a sort of recovery. However, the epidemic has continued to suppress the Hong Kong economy,” Tse said.
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Singapore-based banking giant DBS has downgraded Hong Kong’s economic forecast for this year from a positive 1.5 percent of GDP growth to -0.9 percent.
Due to the economic slowdown and the yuan’s depreciation, tourists are not coming to Hong Kong and they are unable to visit the city due to the stringent epidemic control measures taken that have further dampened the tourism and retail industries, said Tse.
The epidemic would also disrupt Hong Kong’s trade sector as factories on the Chinese mainland have delayed resuming operations after the Lunar New Year holiday due to the outbreak.
Tse explained that Hong Kong not only reexports products from the mainland to the rest of the world, but also products from other places to the mainland.
READ MORE: HK economy slips 1.2% in 2019, first contraction in decade
Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis, warned that the situation could be worse than the SARS epidemic in 2003 as Hong Kong is now more dependent on mainland tourists and selling luxury goods. Thus, the hospitality, luxury retail and transportation sectors are likely to be the hardest hit.
Herrero is pessimistic about the local economy as companies may consider relocating their operations from Hong Kong this year.
AXA Investment Managers presented a relative vulnerability index for Asian economies, taking into consideration four business channels between the mainland and other Asian economies, including tourism, trading of goods and domestic consumption that have been badly hit.
It found that small and open economies with large mainland exposure are more vulnerable than large and inward-looking economies, and Hong Kong topped the list as the Asian economy most impacted.
Financial Secretary Paul Chan Mo-po has warned that the economic impact of the coronavirus outbreak could be more severe than that of SARS, depending on how the epidemic develops.
Writing in his Sunday blog, he said Hong Kong’s job market is under great pressure and the unemployment rate to be announced next week is likely to surpass the 3.3 percent of last year’s fourth quarter.
The epidemic has further dampened the city’s economy which relies heavily on the tourism and retail industries and has been in a downturn since last year, he said.
Chan said he will assess the outbreak’s impact on the local economy in his 2020-21 budget to be presented on Feb 26.
