Hong Kong’s private-sector economy has shrunk to its weakest level since 1998, with the business outlook dropping to a record low in February amid fears the impact of the novel coronavirus will be felt in the next few months.
The seasonally adjusted headline IHS Markit Hong Kong Purchasing Managers’ Index (PMI) sank to 33.1 in February, dropping from 46.8 in the previous month — signaling the sharpest deterioration of private-sector conditions since the survey began in 1998.
The latest PMI has flashed red warning lights on dire private-sector conditions across Hong Kong in February amid the coronavirus outbreak
Bernard Aw, principal economist at IHS Markit
“The latest PMI has flashed red warning lights on dire private-sector conditions across Hong Kong in February amid the coronavirus outbreak,’’ said Bernard Aw, principal economist at IHS Markit.
“The headline index has plunged to an unprecedented level since the survey started in July 1998,” he added.
Both output and new orders have dropped significantly, which has led to businesses cutting back on hiring amid excessive production capacity. It was also reflected by a sharp fall in the backlog of work in the city.
The epidemic also caused disruptions to supply chains, resulting in delivery delays and higher costs for purchased inputs.
The Chinese Manufacturers’ Association of Hong Kong warned in its regular Trade and Economic Bulletin that once the Asia-Pacific supply chain was obstructed, with a domino effect between suppliers and manufacturers, businesses that pass through Hong Kong would decline. This will further hurt Hong Kong’s already battered trade, logistics and related industries.
A vital trade hub and supply-chain management center, Hong Kong has a close economic and trade relationship with the mainland and other economies of the Asia-Pacific region, the association added.
Having been beset by months of violent protests and US-China trade tensions, the city’s business activities and new sales are sinking at a record pace because of the epidemic and general fear of being infected, Aw said.
“With the Hong Kong SAR economy having shrunk 1.9 percent in 2019, the average PMI so far for the first quarter of 2020 points to a deepening recession, raising the urgency for policy support,” he added.
Financial Secretary Paul Chan Mo-po wrote in his blog on Sunday that the city’s economy is now in a deep winter and the operations of some small businesses had been “frozen”.
Last year, the SAR government launched four rounds of relief measures worth HK$26.5 billion (US$3.4 billion). Its 2020-21 Budget unveiled last week included HK$120 billion in one-time measures and initiatives to boost the local economy. Chan expects the city’s economy will grow by negative 1.5 percent to 0.5 percent in real terms this year.
Chan said he remains confident about Hong Kong’s economy, and expects it to grow by an average of 2.8 percent annually from 2021 to 2024, slightly lower than the 2.9 percent over the past decade.
