Hong Kong’s GDP declined by 9 per cent in the second quarter, but this figure should be read in the context of a worldwide collapse in GDP growth during the Covid-19 pandemic. Singapore’s economy, probably the most similar to Hong Kong in terms of structure, experienced a much bigger decline during the same period.
Both economies are similarly open, which means the restrictions in international mobility stemming from measures taken to control the pandemic have halted the economy. In addition, increasing strategic competition between the United States and China has hurt both Singapore and Hong Kong, with more noticeable consequences but a smaller economic deceleration for the latter.
Hong Kong’s economic performance in 2020 comes after an already difficult 2019. The city was in recession while virtually the rest of Asia was growing positively before the pandemic hit.
Last year’s recession did not prompt a clear policy response from the government, though. A series of tiny fiscal stimulus packagesadded up to less than 1 percentage point of GDP. Meanwhile, nothing was done on the monetary and exchange rate side, given Hong Kong’s tight link to the US dollar through a currency board regime.
The pandemic has brought about a bolder stimulus package, but it is still limited compared to most developed economies. Things need to change, and quickly. Read More
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