Hong Kong economy still under stress in Q4 2020 – Natixis

Alicia Garcia Herrero, Chief Economist, the Asia Pacific at Natixis, sheds some light on the Hong Kong economic outlook in her ‘Asia Hot Topics’ report.

Key quotes

“After enjoying a relatively peaceful period with only sporadic increase of Covid-19 cases, Hong Kong encountered its fourth wave of the outbreak from mid-November, together with a renewed global outbreak. To fight the virus, the government has tightened the containment measures back to the same strict level even with some recent partial lockdown.”

“This return towards renewed containment can be seen in sentiment data, with the PMI edging higher to 50 for the first two months of the fourth quarter but back to 44 in December. However, despite the spread of the virus and the government’s harsh measures, the tendency to go to retail and entertainment activities improved during Q4, as shown by the increase in Google Mobility Index from -27% to -19%.”

“Taking the above information and other economic indicators into account, we updated our nowcasting exercise for Hong Kong’s economy in Q4. It points to an estimate of still negative growth rate of -2.5%, which however is slightly better than that of Q3.”

“The improvement, though, is partially due to a still favorable base effect as growth in Q4 2019 was severely impacted by social unrest. In all, Hong Kong’s annual GDP growth in 2020 is estimated to hover around -6%.”