There may be some good news for economy of Hong Kong after two years of anemic growth, according to one economist. “I think, frankly speaking, there’s a lot of headwinds ahead for Hong Kong,” said Hao Zhou, a senior emerging markets economist at Commerzbank.
“But, from a GDP perspective … probably the Hong Kong economy has bottomed out this year. After two years’ sluggish growth, probably we’re going to see positive growth for next year and also 2022,” he told CNBC’s “Squawk Box Asia” on Thursday.
The third quarter this year was Hong Kong’s fifth consecutive quarter of year-on-year contractions, but there were also some signs of recovery. Its economy shrank 3.5% in the July to September quarter, as compared to a 9% contraction in the previous quarter. The government also revised the real GDP forecast for 2020 from a contraction of between 6% and 8%, to a 6.1% contraction.
However, Covid-19 cases have rebounded again recently in the city, leading authorities to reimpose restrictions. But generally, the post-Covid recovery across Asia, led by China, will benefit Hong Kong ahead, Zhou said. The Asian financial hub’s economy has been hit hard by consecutive crises: from the U.S.-China trade war that intensified in 2018, to the months-long protests which shuttered shops and severely hit tourism last year.
Now, Hong Kong is also facing the challenges of controlling the pandemic and its economic impact. Incumbent U.S. president Donald Trump had moved to revoke Hong Kong’s special trading status with the U.S. earlier this year. It came in response to China’s approval of a proposed security law that would effectively bypass the legislature in the special administrative region.
But with the incoming administration of President-elect Joe Biden in January, questions have been raised about what that means for Hong Kong’s relationship with the U.S. Zhou pointed out that as long as tensions remain between the U.S. and China, it won’t bode well for Hong Kong.
“This will be very, very difficult. The most important is not Hong Kong and the United States — I think most important might be China and the U.S.,” Zhou said.