Hong Kong facing threat of worst recession ever, finance chief Paul Chan warns, as he predicts coronavirus will have ‘long-lasting’ impact

Hong Kong’s economy will take a much bigger hit than expected, shrinking by 4 to 7 per cent this year because of the serious and sustained impact of the coronavirus pandemic, the city’s finance chief has warned.

Barely two months after making a rosier prediction in his latest budget – when he forecast that gross domestic product (GDP) for the year would shrink by up to 1.5 per cent or grow by up to 0.5 per cent – Financial Secretary Paul Chan Mo-po told lawmakers on Wednesday that the city was facing the threat of its worst recession ever.

“The magnitude of Hong Kong’s economic recession in the first quarter could be worse than 2008’s global economic tsunami, or the impact of the Asian financial crisis [in 1997-98],” Chan said at the Legislative Council debate on his budget, noting the pandemic’s impact on the city’s economy had been “more serious and long-lasting” than previously thought. “Hong Kong’s economic performance will inevitably be worse than expected.”

Should the economy contract this year, as it did in 2019, it would be the first back-to-back annual contractions since the city returned to Chinese sovereignty in 1997. Last year, it shrank by 1.2 per cent under the double whammy of the US-China trade war and anti-government unrest.