HONG KONG -- Hong Kong posted its biggest-ever quarterly economic contraction on Monday, as the coronavirus pandemic dealt a blow to the Asian financial hub following months of social unrest.
First-quarter gross domestic product dropped 8.9% compared with the same period a year earlier, according to an advance government reading, falling short of market expectations and marking the city's steepest GDP decline on record.
The economic downturn is attributed to "the continued weak performance in both domestic and external demand, as affected by the COVID-19 pandemic," a government spokesperson said in a statement, adding that U.S.-China tensions and financial-market volatility "continue to warrant attention."
In a news conference on Monday, Financial Secretary Paul Chan said the city's economy "would not revive in the short-term," as the three pillars of Hong Kong's economic growth -- exports, investment and consumption -- have all been severely hit.
The preliminary result marks the third consecutive quarterly contraction for Hong Kong, the longest stretch in more than a decade. In 2019, Hong Kong's economy shrank 1.2%.
During the global financial crisis in 2009 and the Asian financial turmoil in 1998, the city posted quarterly declines in GDP, respectively, of 7.8% and 8.3%.
Last week, Chan revised down the annual GDP growth to a range of minus 4% to minus 7%, from an initial forecast of minus 1.5% to positive 0.5%.
He urged people in Hong Kong to "work together" in supporting local consumption. The government has rolled out relief measures costing a total 290 billion Hong Kong dollars ($37.4 billion), including a one-off cash handout of HK$10,000 ($1,290) to all permanent residents.
Meanwhile, Hong Kong is attempting gradually to reopen the economy as the coronavirus outbreak has been largely contained, with local infections falling to zero over the past 15 days. During the same period, there have been only a handful of imported cases.
Social-distancing rules set to expire this week are expected to be relaxed, while government offices have reopened. Although travel restrictions remain in place, business owners with operations in mainland China and Macao can now apply for exemptions from the 14-day compulsory quarantine.
"Hong Kong has an export-oriented economy," said Simon Lee Siu-po, a senior lecturer at the Chinese University of Hong Kong's business school. "Any disturbance around the world would have an impact on Hong Kong."
Lee expects global demand to remain under pressure, which will dampen Hong Kong's economic growth throughout the year even if the spread of COVID-19 has largely been brought under control locally.
Still, Billy Mak Sui-choi, associate professor at Hong Kong Baptist University, believes the worst is over for Hong Kong's economy.
"More people have come out over the past week, and the effects of the government stimulus measures will come into play soon," Mak said. He believes the GDP readings for the second quarter will improve on the back of stronger domestic consumption.
However, tourism and exports will remain weak, Mak said, as quarantine measures and travel restrictions are not likely to be lifted soon.
"The biggest uncertainty will be the performance in the fourth quarter," he said, as some medical experts that warn the coronavirus might gain its momentum again during the winter.