Hong Kong Economic Forecast

Hong Kong Economic Outlook

August 25, 2020

GDP declined severely in Q2, after contracting at the steepest pace on record in Q1. The unemployment rate rose to its highest level since Q4 2004 in Q2, while retail sales plummeted by nearly a third in the same period. As a result, private consumption declined at the fastest pace on record in Q2. Moreover, fixed investment dived at the sharpest pace in over two decades, while exports continued to fall. Turning to Q3, a high unemployment rate and the declining PMI point to sustained deterioration in the labor market and business conditions. On the political front, the anti-subversion law imposed by China in June is stoking major economic uncertainty. Consequently, the U.S. sanctioned some government officials and suspended economic privileges under the Hong Kong Policy Act on 7 August. The possibility of further sanctions poses a significant risk to business investment going forward.

Hong Kong Economic Growth

The economy is expected to decline this year at one of the sharpest rates on record amid the constraining effects of lockdown measures and as weaker growth in mainland China weighs on activity. Moreover, the recent anti-subversion law should weigh heavily on business investment. Nevertheless, strong fiscal stimulus should support a partial recovery in H2. Our panel projects the economy will contract 6.4% in 2020, which is down 0.8 percentage points from last month’s forecast. In 2021, the panel sees the economy growing 4.3%.

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Hong Kong Facts

Value Change Date
Bond Yield1.823.38 %Dec 31
Exchange Rate7.79-0.11 %Jan 01

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