Hong Kong’s economy will post its first annual contraction since the financial crisis this year, the government said Friday, in recognition of the stark economic reality brought about by months of violent protests and the drag from the trade war.
“The Hong Kong economy saw an abrupt deterioration in the third quarter of 2019, as the local social incidents dealt a very severe blow to an economy already weakened by a synchronized global economic slowdown and US-Mainland trade tensions”, the government lamented. “Considering the actual outturn of a 0.6% contraction in the first three quarters of 2019 and the persistent notable downward pressures, the real GDP growth forecast for the year as a whole is revised downwards from 0-1% as announced in the August round of review to -1.3% in the current round. This would be the first annual decline since 2009“.
The third quarter estimate (which showed growth shrank a dastardly 3.2% QoQ) was confirmed.
In May, the government still saw GDP growth this year coming in at between 2% and 3%. Economists generally concurred. That gives you an idea of just how deleterious the unrest has been for the city.
“Ending violence and restoring calm are pivotal to the recovery of the economy”, the census and statistics department said Friday, adding that “the impacts of the local social incidents have yet to show signs of abating [and] consumption and investment demand will likely remain in the doldrums for the rest of the year”.
Stimulus measures announced since the protests began in June are seen as wholly inadequate, but if everyone is being honest, no amount of stimulus will be sufficient as long as people are still being shot and lit on fire. You can’t paper over anarchy with fiscal measures.
Read more: Things Go From Bad To ‘That Guy’s On Fire’ In Hong Kong, As Stocks Dive Amid Escalating Violence
Retail sales have obviously collapsed, as have visitor arrivals and, ultimately, the PMI is a “how low can you go?” situation.
Since full suffrage is a non-starter and protesters are demanding nothing short of real democracy, it’s hard to see how this situation gets resolved.
In the US, the Senate is looking to fast-track support for the demonstrators, a move that will irritate Beijing and could ultimately derail the trade talks.
On June 18, Donald Trump is said to have promised Xi that he would largely stay out of the Hong Kong situation. The White House has offered only lukewarm support for the protesters, saying merely that the president hopes things can be resolved amicably.
