Hong Kong’s economy contracted 2.9% YoY in the fourth quarter.
Believe it or not, that’s what counts as “good” news for the city these days.
The market had expected a much deeper contraction, close to 4%. Similarly, the QoQ print showed the city’s economy shrinking just 0.4%, versus an expected 1.5%.
For the full year 2019, the city’s economic output shrank 1.2%. That too was a shade better than estimates. Economists were looking for -1.4%. Still, it marked the first annual contraction since 2009.
As is the case for December and January data out of China and South Korea (for example), the market is likely to ignore any signs of improvement now that the coronavirus has cast a shadow over the economic outlook for the region (and, increasingly, the world). In other words, the fact that Q4 GDP data wasn’t as bad as feared will be overshadowed by the epidemic, which is expected to add insult to injury for a city beset with seemingly intractable social unrest.
“The local social incidents with violence during the quarter took a further heavy toll on economic sentiment as well as consumption- and tourism-related activities”, the city’s Census and Statistics Department said Monday. “Total exports of goods continued to decline amid the difficult external environment, though at a somewhat narrower rate”.
Retail sales and the PMI plunged in the second half of 2019, as violent protests in the city took a heavy toll.
I suppose it’s possible to suggest the virus outbreak might actually serve to quell the unrest, as protesters will presumably be wary of gathering in large crowds knowing there’s a dangerous respiratory infection going around, but that’s hardly a good argument for being optimistic about the local economy.
The more likely outcome is simply that the virus scare will be another reason for tourists and shoppers to avoid the previously bustling financial hub.
The government didn’t mince words. ” The outlook for the Hong Kong economy in 2020 is subject to high uncertainties, including those stemming from the pace of global economic recovery, US-Mainland trade relations and the local social incidents”, the press release reads. “It also depends much on the development of the novel coronavirus infection in Hong Kong and Asia, which could further weigh on economic sentiment, consumption- and tourism-related activities and even economic performance of some Asian economies”.
It is, in a word, unfortunate.
