Hong Kong is on the verge of its first recession in a decade as increasingly violent anti-government protests scare off tourists and bite into retail sales in one of the world's most popular shopping destinations. The economy shrank 0.4% in April-June from the previous quarter, revised government data showed on Friday, and conditions have sharply deteriorated since then as demonstrations spread, closing the airport at one stage and paralyzing prime shopping areas. The Asian financial center, which also has one of the world's busiest ports, was already under intense pressure from the escalating Sino-U.S. trade war and China's biggest economic slowdown in decades. The city's government confirmed on Friday it was slashing its full-year 2019 growth forecast to a range of 0%-1% from the previous 2%-3%, which it had flagged a day earlier when it announced a modest economic support package. The quarterly contraction in gross domestic product (GDP) was slightly worse than an initial estimate of -0.3% released just a few weeks ago, and pointed to a sharp deceleration from 1.3% growth in the first quarter. Two successive quarterly contractions would meet the standard definition of a recession. Months of increasingly hostile confrontations between police and protesters have plunged the international business hub into its worst crisis since it reverted from British to Chinese rule in 1997. While official data has yet to fully reflect the impact of the latest violence, a private survey by IHS Markit found business activity in Hong Kong contracted for the 16th straight month in July, falling to a level not seen since March 2009. "The recent local social incidents, if continued, will cause significant disruptions to inbound tourism and consumption-related economic activities, further dampen economic sentiment, and even hurt the reputation of Hong Kong as an international financial and business center," government economist Andrew Au said in a statement. The government also expects exports to remain sluggish or even weaken further in the coming months. Washington is imposing more tariffs on Chinese imports from Sept. 1, though the two sides are still in talks. "It would still be difficult for (them) to reach a trade deal in the near future given their deep differences across a range of issues," Au said. The economy expanded 0.5% in the second quarter from a year earlier, its slowest pace since the 2008/09 global financial and down slightly from an initial reading of 0.6% and the first quarter's 0.6% pace. -Reuters
