HK toppled from top spotTop News | Bloomberg and Stella Zhai 18 Mar 2020
Hong Kong has lost its crown as the world's freest economy for the first time since 1995, beaten by Singapore.
The political and social turmoil has begun to erode its reputation as one of the best locations to do business, dampening investment inflows, a global survey showed.
Hong Kong's economic freedom score fell by 1.1 points from a year ago to 89.1, making the SAR the second freest in the 2020 Index of Economic Freedom, published by American conservative think tank Heritage Foundation.
The city gained high scores of 90 or above in seven of 12 components, but its total score was dragged down by the gauge for investment freedom, mainly due to security issues arising from the anti-government protests last year, the poll said.
Its economy was rated the freest in the world from 1995 to 2019. After Hong Kong, New Zealand was No 3.
Hong Kong's GDP had been growing steadily over the past five years, but the SAR fell into recession in 2019. The city's traditionally open and market-driven economy has become increasingly integrated with the mainland through trade, tourism and financial links.
Risks to Hong Kong's economic freedom have grown correspondingly, the foundation said. It added: "Intensifying uncertainties related to security issues have undermined an otherwise favorable investment climate. The territory remains a dynamic global financial center with a high degree of competitiveness and openness, but the sense of risk is also heightened."
A government spokesman said the social unrest might have affected the city's score in investment environment, but its institutional strengths are unscathed and underlying fundamentals remain strong.
The economy is forecast to contract for a second year after it fell into its first annual recession in a decade in 2019, facing fallout from the protests and the virus.
DBS Bank (Hong Kong) projects the city's GDP will contract by 0.9 percent, with economic growth dropping 3.8 percent in the first quarter and 3 percent in the second quarter, compared with a previous estimate of positive 1.5 percent growth for the whole year.