Friday, November 1, 2019

Hong Kong Officially in Recession

A cloud of teargas takes Nathan Road, a busy shopping street in Hong Kong, during clashes between protesters and riot police on October 20, 2019. Image credit: Getty Images

Five months of protests have knocked the Hong Kong economy – and the destructive unrest has disrupted businesses and dealt a particularly heavy blow to the tourism and retail sectors. 

For sure, Hong Kong, one of the world's most visited cities last year, with 30 million tourists, is suffering. 

According to CNN Business, visitor numbers plunged 37% year on year for the third quarter. And hotels are on average only two-thirds full, a drop of 28% compared to the same period a year earlier. 

Interestingly, the city's financial markets are largely holding up. The Hang Seng Index is still up 4% for the year, and the political crisis hasn't been a deal breaker for investors yet, many of whom still see the city as an important gateway to Asia. 

Nevertheless, the Hong Kong government injected more than HK$20 billion to combat the mercantile slowdown including help for the transport, tourism and retail sectors. And more relief measures can be expected. 

But the government argues there's only so much it can do to stem the economic slide. 

Hong Kong's Financial Secretary Paul Chan (right) wrote in a blog post: "Our society and the economy need to take a breather and need to get back on the road". 

He warned that it would be "extremely difficult" to hit the government's pre-protest forecast of growth of between 0% and 1% for 2019. 

That is becoming clear as day because growth figures issued on Thursday showed Hong Kong has entered a technical recession, defined as two consecutive quarters of negative growth. 

The economy shrank 3.2% during the three months to September, compared to the previous quarter. That's a sharp slowdown from the 0.5% contraction recorded in the second quarter, and much worse than economists had expected.

With no immediate resolution to the city's political crisis on the cards, Hong Kong's first recession in a decade could extend into the new year. Compared to the previous year, the economy shrank 2.9% in the third quarter. 

So, expect more pain to come. 

And Hong Kong’s embattled leader Carrie Lam (right) declared Tuesday that her government will “tackle the violence head on” as the Asian financial hub remains under siege from mobs that go berserk with an arsenal of umbrellas, laser pointers, sticks and poles, metal shafts, bricks, rocks, petrol bombs and anything that can be used as weapons. 

I’m not sure what else the city can do to stem the blow-up. 

Beyond more tear gas, more rubber bullets and more water cannons – I ask again, what else?

My Toastmasters update:

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