A food deliveryman pushes his bicycle past stores on Canton Road in Tsim Sha Tsui, Hong Kong, Feb. 2020. (JUSTIN CHIN / BLOOMBERG) 

Hong Kong’s retailers will need to get creative to survive the deepening recession that’s enveloped the city as tourists from the mainland who fueled past rebounds are unlikely to come to the rescue this time.

The business environment for retail trade will remain very difficult in the near term amid the deep economic recession and sharp deterioration in the labor market

Spokesman, HKSAR govt

The city’s retail sales by value in March sank 42 percent from year earlier to HK$23 billion (US$2.97 billion), according to a government release. That was a slight uptick from February’s record decline. By volume, sales dropped 43.8 percent from a year earlier.

ALSO READ: HK deep in recession as GDP dives 8.9 percent

The two straight months with declines greater than 40 percent is an unprecedented period of weakness. The city’s wider economy contracted 8.9 percent in the first quarter from year-ago levels, suffering its worst quarter on record and extending the first recession in a decade. Private consumption sank 10.2 percent in the period while exports of services plummeted 37.8 percent, according to the government release Monday.

In a press release, a government spokesman said that retail sales continued to plummet in March, as the COVID‑19 pandemic and resulting anti-epidemic measures brought inbound tourism to a standstill and seriously disrupted consumption-related activities. For the first quarter as a whole, the volume of retail sales fell by 36.9 percent year-on-year, the largest decline for a single quarter on record.

"The business environment for retail trade will remain very difficult in the near term amid the deep economic recession and sharp deterioration in the labor market," the spokesman said.

Already in Recession

While economies around the world are struggling with lockdowns from the coronavirus pandemic, the outlook for Hong Kong’s consumption industries is particularly bleak with the acute downturn due to the virus coming on the heels of a recession from months of anti-government protests stemming from the extradition bill incident. 

ALSO READ: Tourism in HK suffers sharp drop for holiday 

With Hong Kong also stepping up border control measures due to the virus, visitor arrivals from Chinese mainland plummeted about 99 percent from a year ago in March to just over 30,000 people, according to figures from the Hong Kong Tourism Board. That’s down from a peak of more than 5.5 million visitors from the mainland in January 2019, the data show.

“We are in a very difficult time,” Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor said at a regular briefing Tuesday. Lam also announced the city is relaxing some social distancing measures. “When compared with the financial crisis, the SARS crisis, the financial tsunami, it’s worse than those occasions.”

Earlier on Tuesday, Lam also promised more relief measures for businesses and residents hit hard by the deepest economic slump on record. 

READ MORE: Financial chief: Unity crucial to HK's economic revival 

Lam also appealed to the Legislative Council to do its part by accelerating the deliberation on government budget and a number of bills, including those relating to infrastructure development. Lam expressed the hope that the LegCo’s House Committee could go back to work after being in a limbo for more than six months. Lam appealed to lawmakers to resolve the deadlock and pass urgent expenditure proposals. 

The opposition’s stonewalling tactics have prevented the LegCo’s House Committee from electing a chairperson despite 16 meetings held. The impasse has put 14 bills and more than 20 subsidiary regulations on hold, including some directly impacting the livelihood of HK residents. 

Bleak Future

The dire situation is prompting some retailers in the city to accelerate shifts in their business.

READ MORE: Hong Kong hotels on cliff edge from protest, pandemic pain

Kidsland International Holdings Ltd, which sells toys for children, has begun ramping up online ordering and home delivery services in Hong Kong, said Sherman Hung, an executive director with the firm.

The company’s strategy had previously been adopted on the Chinese mainland, but not in the Hong Kong Special Administrative Region until the virus forced the company’s hand.

“COVID-19 is an accelerator in promoting us to adopt and evolve quickly,” Hung said on Bloomberg TV. “In the past, of course, a significant portion of our businesses is represented by cross-border travelers coming to Hong Kong to consume. But there’s also a very significant portion being represented by local demand.”

READ MORE: No ‘V-shaped’ recovery seen for tourism business

Assuming the virus crisis improves, Hong Kong will come out of recession gradually toward the end of the year, Financial Secretary Paul Chan Mo-po said at a press conference Monday. The city potentially faces its worst full-year performance on record with a contraction of as much as 7 percent, after the economy shrank 1.2 percent last year.

“Our economic situation is very challenging, we are deep into recession,” Chan said. “Going forward, the second quarter, we believe that even if there is improvement, the improvement will be gradual and small.”

Li Bingcun contributed to this report