The economic prospects of Hong Kong are starting to look bleak. Experts warn that the autonomous territory is headed for a recession after weeks of protests destroyed the retail sector and disrupted the booming tourism industry. Political demonstrations in the country erupted in June this year.
At first, the protests were triggered by an extradition bill that mandated local authorities to extradite wanted suspects to China to face trial there. However, the demonstrations have since evolved, calling on greater democratic freedoms and more autonomy from China.
The protests, which started peaceful, took a violent turn as demonstrators engaged with law enforcement. As a result, major retailers in the country were hit hard. The number of tourists visiting the city has also fallen massively over the last few months. The economy has now fully stagnated. Third-quarter growth numbers planned for release this Thursday are expected to show negative growth for the second quarter in a row.
This trend is not expected to change anytime soon. Hong Kong is truly headed towards a full-blown recession. Experts are warning that the tough economic times ahead may make an already politically delicate situation even worse.
The tourism industry, in particular, has seen a sharp decline in growth over the last few months. The number of visitors coming to the city fell sharply in the first half of October 2019. The trajectory has remained on a downward trend ever since.
Average hotel occupancy rates also fell during the same period. Analysts note that the tourism industry has never been this worse since the SARS outbreak in 2003. SARS was a deadly virus that infected and closed down Hong Kong. It was one of the most difficult periods in the city’s history.
Hong Kong has remained, for years, a tourist hotspot and there is no doubt that the industry contributes massively to local GDP. According to reports, just last year alone, the city let in over 30 million visitors, the highest in the world.
But as protesters barricaded airports and paralyzed air travel, it became impossible for tourists to get into the city. The fear of violence may have also disincentivized people who had already made plans to visit.
The retail sector is also feeling the pinch. Overall sales volume for all retailers in the city were down 25.3% in August compared to the same period last year. 2019 also saw the steepest year-on-year decline in retail sales volume.
It’s not clear if Hong Kong will recover from this slump anytime soon. The political situation remains fragile and more could still happen in the future. However, analysts are calling on increased government intervention to try and stimulate growth, especially in the retail and tourism sectors.
Cash incentives for travel agents who can bring in visitors from now on have been suggested. A political solution to end the unrest should also be considered. Even though the Hong Kong government withdrew the extradition bill that triggered the protests, demonstrations have continued and have grown more violent by the day.