Hong Kong is facing recession for the first one in 10 years during Q3, according to the government data. The rising anti-government protests and the burgeoning US-China trade war is taking a toll on the economy.
The economy shrunk by about 3.2 percent in the period from July to September as compared to the previous quarter. The GDP reduced for the second quarter consecutively, thus meeting the criteria to qualify as a recession situation. The protests are likely to continue to take place through the rest of the year and analysts believe that it would result in a steeper slimp almost akin to the time when the global economy was facing a financial crisis in 2008/2009 an during the SARS epidemic in 2003.
As compared to about a year ago, the HK economy contracted by 2.9 percent.
“Domestic demand worsened significantly in the third quarter, as the local incidents took a heavy toll on consumption-related activities and subdued economic prospects weighed on consumption and investment sentiment,” according to the government statement.
The protests that have taken a violent turn have spanned over a period of five months, thus resulting into a crisis level that was felt by the city back when it reverted from British rule to Chinese rule in 1977.
Lesser number of tourists are choosing to visit Hong Kong and retailers are feeling the hit in terms of a steep decline in sales as the stock market continues to falter. Even shopping malls and other businesses are closing their shutters earlier in the day as the unrest in the city continues to escalate.
This recent slump into recession is proving to be challenging for companies and employers in the region as the city also happens to be one of the major financial hubs with banking, fund, and wealth management assets accounting for more than $6 Tn.
It is often considered a great point of pride and a step in the right direction for western-born companies to expand to Hong Kong first, and then move on to tap into the Chinese market. At the same time, Chinese firms use it as a ground to test out their plans for the global market.
The store closures are likely to result in job losses and the uncertainty surrounding the trade-war in addition to the anti-government protests are likely to impact the overall economy is a major way. It remains to be seen whether the government-backed stimulus measures introduced to fuel the economy in the right direction would bear fruit.