Hong Kong’s construction industry was already in a dire state prior to the COVID-19 outbreak, with output contracting by 9.3% in 2019, and the situation has worsened amid the pandemic, with renewed tensions following political interference from China.
Although the local protests have contributed to the worsening performance, given the impact on investor confidence, Hong Kong’s construction industry had already been struggling amid a general slowdown in residential construction, and a sharp drop in transport infrastructure works.
According to the Census and Statistics Department (C&SD), the country’s construction industry continued to decline in the first quarter of 2020, dropping by 9% year-on-year (y-o-y) in real value add terms, marking the sixth consecutive quarterly decline on a y-o-y basis since the fourth quarter of 2018.
In the coming quarters, the construction industry is expected to contract further, as investments on major infrastructure projects could be affected due to funding issues, as well as the fear of the resurgence of COVID-19 and the continuation of civil unrest.
Reflecting the recent disruption and the weaker outlook for economic growth, the publisher expects the construction industry to contract by 9.2% in 2020. Key risks associated with Hong Kong’s construction industry outlook include a worsening political crisis following China’s decision to implement new national security laws for Hong Kong, and the subsequent decision by the US to remove Hong Kong’s special status.
The US government’s trade war with China and the removal of Hong Kong’s special status is expected to decrease investment in the construction industry.