HK Economy Suffers Record Battering Over Covid

The Hong Kong economy has taken a record beating amid Covid-19.

The economy shrank 6.1 percent in 2020, the worst annual economic performance ever.

It's the second straight year the economy has contracted. GDP fell by 1.2 percent in 2019.

In 1998, battered by the Asian financial crisis, the economy shrank 5.9 percent.

According to advance estimates released by the government on Friday, GDP in the fourth quarter of 2010 dropped by 3 percent from the same period the year before. That's a slight improvement from a 3.6 percent contraction in the three months ending September.

A government spokesman said the pace of recovery in the October-to-December period was slow because of the fourth wave of the coronavirus pandemic.

As for the entire year, the government said while social stability was restored in Hong Kong, the 6.1 percent contraction was mainly due to the fallout from the pandemic, with consumption- and tourism-related sectors such as accommodation, food services and retail trade hit the hardest.

By contrast, financial market activity stayed robust and activities relating to exports and imports of goods picked up visibly in recent periods.

The government expects the economy to return to growth this year, but said recovery is subject to uncertainties.

"I would rather look at quarter-on-quarter growth and also the actual level of GDP. Those two numbers will really tell the truth," said Iris Pang, ING’s chief economist for Greater China.

"This year, in Q1 and Q2, we expect actually 5 percent year-on-year growth but that doesn't mean anything. It is purely a negative base effect" because of declines of around 9 percent in each of those quarters, she said.

Pang also said she doesn't expect international travel to resume until later in the year, further clouding the city's economic outlook.

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