Ongoing U.S.-China tensions and uncertainty related to how a game-changing national security law introduced last year could affect non-Chinese investment demand in the global financial hub remain significant risks for the recovery, analysts say.
The economy contracted 3.0% in October-December from a year earlier, shrinking for the seventh quarter in a row, government advance estimates showed on Friday.
That was compared with a revised 3.6% slide in July-September, a 9.0% contraction in April-June quarter and a 9.1% contraction in January-March period.
The global financial hub's economy recovered in the fourth quarter of 2020, albeit at a slow pace amid new wave of the local epidemic. Strengthening exports of goods and active financial market activity provided support, the government said.
"The Hong Kong economy is expected to see positive growth for 2021 as a whole, but the economic situation in the first half of the year will remain challenging and the degree and speed of recovery is subject to a host of uncertainties, especially those about the pandemic situation," a government spokesman said in a statement.
The city's economy was already reeling from often violent anti-government protests in 2019 and the U.S.-China trade war.
For the whole of 2020, the city's economy shrank 6.1%, its worst annual performance on record since 1962, in line with its earlier forecast.
Hong Kong's unemployment rose to a 16-year high of 6.6% in October-December 2020 and was expected to rise further. Tourist arrivals for 2020 dropped 93.6%, compared with a 14.2% decline in 2019.
The government said the Chinese economy is set to strengthen further, providing support to Hong Kong. The speed of recovery will also track recovery in major economies, evolving China-U.S. relations and geopolitical tensions.
(Reporting by Twinnie Siu and Donny Kwok; editing by Larry King)
