Rebound or recession?
The year 2019 was a difficult one for the global economy, as geopolitical uncertainty and a slowing Chinese economy combined to trigger a global manufacturing downturn. The Covid-19 pandemic has hit both supply and demand in major markets and rattled global financial markets. Lacklustre performance is set to continue in 2020.
Trade-related issues remain the biggest threat to our growth outlook. While the immediate risk of a further escalation in the tariff wars between the US and China has diminished, trade tensions between the two biggest economies of the world will remain high until at least the US presidential election in November—the outcome of which is still highly uncertain.
Hong Kong’s economy was already severely hit by trade tensions and protests last year, before being dealt a further blow by the coronavirus outbreak. Real GDP contracted by 1.2% in 2019, the slowest rate of expansion since 2009. In recent weeks we have made downward revisions to our real GDP forecast for Hong Kong in 2020, and now expect the economy to contract by 2.3%. This is in light of the latest data, as well as after factoring in the impact of economic disruptions related to the pandemic.
Despite the slowdown, the regional economy of Asia will continue to expand at a faster rate than any other region in 2020-24. Growth will be supported by comparative political stability, high rates of saving and investment, a rapid rate of urbanisation, and an increasing adoption of digital technology which will open up new opportunities across markets and sectors.