On the ropes: Hong Kong’s economy reels from virus pain

The Lunar New Year is supposed to be a time of renewal and positive energy. For Hong Kong, the first few weeks of the Year of the Rat in the Chinese calendar have been anything but a celebration of those things.

The city was just regaining some stability after more than six months of frequently violent pro-democracy protests, when a new coronavirus struck mainland China, infecting tens of thousands of people, and killing hundreds.

Shops, restaurants, and the travel and tourism sector now appear to be even more vulnerable than they were just a couple of months ago.

Brian Au Yeung, director at Mytouragent Ltd, books flights, hotels, visas and tours for international and Hong Kong-based clients. He told Al Jazeera that his business survived all the months of protests, but the virus could be a bigger problem.

“Around Chinese New Year, business drops a little, that’s usual. We’ve already sold most of the tickets, and issued them last month.” Au Yeung said. But he notes that since then, it’s been much worse, with no new bookings, only cancellations, and 16 bookings refunded so far.

Hong Kong’s economy had already entered its first recession in 10 years even before the outbreak, with the latest figures showing that the economy shrank by 1.2 percent over the course of 2019.

The forecasts for 2020, however, vary widely, showing just how uncertain experts are as to how the virus could affect the economy.

For instance, Dutch bank ING says Hong Kong’s gross domestic product – the total value of all the finished goods and services produced in the territory – could go from its current projection of an abysmal 5.8 percent contraction to a marginally worse shrinkage of 5.9 percent.

That makes The Economist Intelligence Unit’s forecast of growth of 0.5 percent to 1 percent seem positively rosy, although the research group revised its numbers down from an earlier forecast of 2.1 percent.

Hong Kong’s finance chief Paul Chan warned that the duration of the virus outbreak will dictate just how bad things get for Hong Kong’s economy.

“It is estimated that the epidemic situation will greatly increase the risk of continued economic contraction this year,” Chan said in his first weekly blog of February. “As this will cause a decrease in government revenue and an increase in expenditure, it means the fiscal deficit may rise further.”

‘Triple whammy’

The government has announced a fund of 10 billion Hong Kong dollars ($1.3bn) to help the city tackle the virus.

“The Hong Kong economy has been hit by a triple whammy of the US-China trade war, anti-government protests and now the coronavirus,” Peter Lewis, a financial consultant and host of the popular Money Talk radio show on local broadcaster RTHK, told Al Jazeera. “This is a very bad recession for HK which is likely to be very deep and protracted.”

But beyond the economic numbers, the outbreak has forced an uneasy extension to the Lunar New Year holidays – originally scheduled to last from January 25 to 29 – and disrupted Hong Kong’s famously frenetic pace of life. There are noticeably fewer people out and about. Those who do venture out mostly wear masks and avoid others in public – practises familiar to anyone who lived through the 2002-2003 outbreak of severe acute respiratory syndrome (SARS).

The government has suspended schools, kindergartens and many universities until March at the earliest. Public sector workers – other than those in the emergency services and other essential sectors – were first told not to go to their offices until the start of February, and are now being instructed to work from home.

Major banks including HSBC, Commercial and Standard Chartered have limited their opening hours, or have shut branches temporarily – with customers urged to use online banking.

Government-run museums, sports facilities and immigration services such as visa processing have been suspended until further notice. Even the Hong Kong postal service stopped for a time, but has reopened with limited hours.

Post office employees reported to local media that at the start of February, about 8,000 packages were held up at the airport, 80 percent of them containing face masks, judging by declaration details. People have been queueing to buy masks, but they’ve sold old out in many shops and pharmacies.

Retail in need of therapy

Though Hong Kong is famed for its shopping, its retail sector has become one of the worst-hit parts of the economy, as it faces a double whammy of the outbreak and the protests before it.

Retail sales fell by 19.4 percent in December compared with the same month in 2018, according to the latest available government figures. Analysts say they see further declines on the horizon.