Hong Kong's economy shrank year-on-year for the second quarter in a row, the government's advance estimates showed on Monday.
The city's GDP was down 1.4 percent on year in the three months to June – worse than analysts' forecasts – following a 3.9 percent contraction in the first quarter.
Two consecutive quarters of negative growth is considered a technical recession.
But on a quarter-to-quarter comparison, the local economy grew 0.9 percent.
"The Hong Kong economy improved in the second quarter, but the extent of improvement was smaller than expected," a government spokesperson said in a statement.
"The recent increase in the number of Covid-19 cases and tightened financial conditions have constrained the momentum in the latter part of the quarter," he explained, adding that weakened global demand and continued disruptions to cargo flow between the mainland and the SAR also weighed on the economy.
Terence Chong, an associate professor of economics at the Chinese University, said he believes the local economy to show a stronger rebound in the second half of the year.
"Normally those export numbers would be higher because of the Christmas holiday and so on, we would also expect an improvement in social distancing measures and also there may be a chance of the reopening of borders," he said.
But Chong warned that the year-on-year contractions in the first two quarters, coupled with a high base of comparison and a smaller labour force, would make it an uphill battle for the local economy to meet the government's annual growth forecast of one to two percent.
He said he finds it still possible for the economy to reach the lower end of the growth forecast.
"But if we would like a higher percentage of growth like 1.5 or two [percent], that would be very unlikely."