Asia Economy

Hong Kong cuts GDP forecast for 2020 after economy contracts 9% on-year in the second quarter

Key Points
  • Hong Kong's economy contracted by 9% in the second quarter compared to a year ago, official statistics showed Friday.
  • The Hong Kong government also downgraded its forecast for the economy, projecting a contraction of between 6% and 8% in 2020.
A man wearing a face mask as a preventive measure walks past a closed bar in Hong Kong.
May James | SOPA Images | LightRocket | Getty Images

Hong Kong's government downgraded its full-year economic forecast on Friday after a recent flare up in coronavirus cases threatened to further derail the city's economy. 

The government now expects the city's economy to shrink by between 6% and 8% in 2020, compared to its previous projection for a contraction of between 4% and 7%.

"If the current wave of local infection can be contained within a short time and barring any further sharp deterioration in the external environment, economic performance for 2020 as a whole can hopefully fall within the upper half of the range forecast," according to a statement by the government economist, Andrew Au. 

The downgrade came after the Hong Kong economy contracted by 9% in the second quarter compared to a year ago. It was the fourth consecutive quarter of year-over-year decline in gross domestic product, official statistics showed.

The updated data on the city's economic performance exactly matched its official advance estimates.

"The Hong Kong economy remained very weak in the second quarter of 2020, as the COVID-19 pandemic continued to deal heavy blows to global and local economic activities," said Au. Covid-19 is the formal name of the coronavirus disease that has killed more than 750,000 people around the world so far.

Hong Kong has reported more than 4,300 cumulative cases, including 66 deaths, according to official statistics.

Economists had earlier warned that Hong Kong — a semi-autonomous Chinese territory and a major financial hub in Asia — would struggle to recover from its economic slump given a recent flare up in coronavirus cases. Several analysts downgraded their GDP forecasts for the city last month.

The renewed outbreak, which began in July, led the government to tighten social-distancing measures that includes a ban on large gatherings and restrictions on dine-in services at restaurants. Hong Kong's leader Carrie Lam also warned that the increase in daily infections could overwhelm the city's health-care facilities and cost lives. 

Hong Kong's economy was already in a recession before the coronavirus pandemic. It was partly the result of large-scale pro-democracy protests that dragged on for months last year, and hurt businesses and tourism-related industries. Global uncertainties, such as the U.S.-China trade war, also dealt a heavy blow to its economy.