Hong Kong is slipping into a technical recession in the July-September quarter, if GDP continues to fare worse than in the second quarter, when it shrank by 0.3 percent from the first quarter.
Technical recession definition met
When this happens, the third quarter is bound to confirm the recession by its technical definition of two consecutive quarters of economic contraction.
Gross domestic product (GDP) growth forecast by the government for the whole year has already been cut from 2 to 3 percent, to 0 to 1 percent.
Economists are echoing the sentiment and have predicted that Hong Kong will not be able to avoid a recession this year.
Hong Kong’s Financial Secretary Paul Chan had also warned on Aug. 15 the city could be heading for a recession.
That was the day Chan unveiled a HK$19.1 billion (S$3.39 billion) economic support package, which he clarified had nothing to do with ongoing protests, but was what had already been planned to be carried out.
He said the stimulus package could help boost the economy by 0.3 percent -- but economists are less optimistic of its effects.
An economist interviewed by the South China Morning Post said: “The relief measures are not sufficient to prevent the economy from slipping further.”
Hong Kong is battered by escalating political protests and the prolonged China-U.S. trade war.
Hong Kong’s exports had dropped 9 percent year-on-year in June.
Analysts have warned that in the current climate, handouts are ineffective, as firms and consumers are in no mood to spend.
There are also no obvious infrastructure upgrades needed as well.
Analysts expect only announcements of more handouts and tax breaks at Chief Executive Carrie Lam's annual policy address in October, given how the Hong Kong government has a long track record of failing to adequately boost housing supply.
What Hong Kong is experiencing economically
Banks are issuing unprecedented profit warnings, while hotels and restaurants are half-empty.
Several global events have been postponed and retail sales are predicted to drop by 20 to 30 percent for the whole of 2019.
Secretary for Commerce and Economic Development Edward Yau Tang-wah said on Aug. 14 that tourist arrivals slumped 33.4 percent in the second week of August year on year, declining further from a 31 percent decrease in the first week of the month.
Visitors from mainland China that usually account for 80 percent of arrivals in Hong Kong are down the most as people fear for their safety, Reuters reported.
Revenue from hotel room sales was set to plunge 50 percent in August.
Organisers of several conferences and exhibitions are scrambling to postpone events, some even moving to Singapore and Thailand venues.
The organiser of the Hong Kong Jewellery and Gem Fair have been asked by trade representatives of the world's largest diamond trading centres to postpone the high-profile event.
The event to be held in September typically welcomes more than 54,000 visitors to Hong Kong.
BlackRock Inc, the world's largest asset manager, has postponed a two-day September conference at the Four Seasons Hotel until February "so that as many partners as possible from across Asia are able to join".
The Hong Kong Retail Management Association, which represents more than 8,000 businesses, urged all landlords to halve rents for six months and warned that if the situation continued, "many retailers may have to sack staff".
More than 20 companies, including land developers, hotel groups and the rail operator MTR Corp, said in recent earnings reports that the protests have been damaging.
The Catering and Hotel Industries Employees General Union told Reuters that employers had asked some of its members to take non-paid leave this month because of the downturn in business.
"When you have a boom for so many years, and now you get a bust, the bust is going to be quite massive also," an economist told Reuters in the last week of August 2019.
Top photo via etan liam Flickr