A man stands beside debris of a truck that was burnt down by rioters on a road in Tai Po on Friday. (PHOTO / CHINA DAILY)

The Hong Kong government trimmed its economic growth forecast for this year as the economy continues to face the triple whammy of a slowing mainland economy, global trade tension uncertainties and social unrest unleashed by the "Extradition Bill Incident".

Economic growth for 2020 will remain sluggish although a low base effect is expected to provide some support in the later part of 2020.

Chung Ling-wei and Bernard Aw, principal economists at IHS Markit

The administration on Friday downgraded its forecast for this year's gross domestic product growth rate from previous zero to 1 percent made in August to negative 1.3 percent for the full year of 2019, the first annual GDP contraction since 2009.

In the third quarter, the city's battered economy dwindled at an annual rate of 2.9 percent which was higher-than-expected. In the same period, GDP retreated 3.2 percent from the previous three months, after a 0.5 percent contraction in the second quarter, as the final data released by the government on Friday was in line with the preliminary data released last month.

Two consecutive periods of negative growth mean Hong Kong has fallen into a technical recession. 

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"Looking ahead, the difficult external environment is likely to persist in the near term. Recent economic data point to the continuation of a synchronized growth slowdown in the major economies. The government will continue to closely monitor the situation and introduce measures as necessary to support enterprises and safeguard jobs," Government Economist Andrew Au reckoned.

"As the economy has contracted by 0.7 percent during the first three quarters from a year ago, a full-year recession now looks inevitable for 2019. We further revise the 2019 GDP forecast from 0.3 percent to negative 1.1 percent," argued Carie Li Ruofan, an economist at OCBC Wing Hang.  

Financial information services provider IHS Markit projected Hong Kong economy may retreat 2.1 percent this year, followed by a milder decline of 0.3 percent next year.

"Economic growth for 2020 will remain sluggish although a low base effect is expected to provide some support in the later part of 2020. We do not expect a clear recovery to emerge until the second half of 2020 when domestic confidence is forecast to be restored to pre-crises levels," predicted Chung Ling-wei and Bernard Aw, principal economists at IHS Markit.

'See no quick fix'

Hong Kong's private sector business activity, as tracked by IHS Markit Hong Kong Purchasing Manager's Index, dwindled at the record-fastest pace in over 21 years since the survey began in 1998.

"We see no quick fix to the economy's challenges, particularly the threat to the city's reputation for stability, which has underpinned its role as a global commercial and banking center," Bloomberg Economics Economist Qian Wan warned, forecasting Hong Kong economy may shrink 1.5 percent for the full year of 2019.

The US-based financial information services provider cautioned that although the government has adequate fiscal reserves to unveil a bigger stimulus package to support businesses and households, its measures unveiled in annual policy address and short-term fiscal stimulus are far from sufficient to revive the economy or restore confidence.

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Alicia Herrero, Asia Pacific Chief Economist at French-based investment bank Natixis, agreed: "the Hong Kong government has missed the boat on fiscal stimulus to provide the much-needed support to the economy. The stimulus announced so far only accounts for 0.7 percent of GDP, which is highly disproportionate to the current difficult time."

Natixis estimated the city's economy may contract up to 2 percent this year and retreat up to another 3 percent next year if the domestic dilemma persists without meaningful fiscal stimulus.

The city's economy is slipping into the trajectory recession this year, with its first quarter and second quarter GDP growing 0.6 percent and 0.4 percent from a year ago, respectively. Last year, the domestic economy expanded 3 percent.