Once-vibrant Hong Kong is teetering on the brink of recession.

Hong Kong’s economy contracted by 0.4% in the first quarter compared to the quarter before, the largest contraction since 2011. It grew by 0.8% compared to a year earlier, falling short of the median 1.7% rise forecast by five economists polled by The Wall Street Journal.

As a smaller economy dependent on mainland China, more-open Hong Kong provides a good gauge of growth in the world’s second-largest economy, where data often paints a hazy picture of growth.

“While the market still wonders whether China was indeed growing at 6.7% year-on-year in 1Q16 [the first quarter], it should simply look at the situation in Hong Kong to determine how China is doing and what level of growth we should be assuming for the country,” said Kevin Lai, economist at Daiwa Capital Markets.

The worst is yet to come in Hong Kong, say several economists, as key parts of the economy remain weak. Many released recession calls on the city’s economy Monday. A recession is two consecutive quarters of GDP contraction.

Consumers are hardly spending, exports are sluggish, and the property market is undergoing a prolonged correction.

Crowds in the city’s heavily air-conditioned malls, once filled with mainland Chinese shoppers, are thinning and retailers are racking up losses as a result. Last week, luxury jeweler Chow Tai Fook said profits for the year ended March will decline by 40-50% on year. The week before that, cosmetic retailer Sa Sa said profit will drop by more than 50% due to low sales. Domestic private consumption, which makes up about two-thirds of Hong Kong's GDP, rose just 1.1% year over year during the first quarter--down from a 2.7% expansion in the fourth quarter last year.

Hong Kong’s port, once the world’s busiest, has unloaded less cargo in the past few years as ships bypass it for mainland Chinese ports. Total exports of goods fell 3.6% in the first quarter in the city from a year ago, widening from a 0.5% decline in the previous quarter.

A general view of the business district of Wanchai in Hong Kong, China, April 5, 2016. Photo: European Pressphoto Agency

Home prices have fallen more than 10% since their peak last September and transactions are faltering as both buyers and sellers take a wait-and-see attitude. Interest rates and the supply of homes both are set to rise. The number of home sales transactions in the first four months of this year fell by more than 50% compared to the same period last year, according to the Hong Kong Land Registry.

The looming Federal Reserve interest rate hike will be a “major headwind,” said research house Capital Economics. The Hong Kong dollar is pegged to the U.S. dollar and interest rates track those in the U.S. Tighter monetary conditions will weigh on consumption, property and investment growth further, the research house says. The Hang Seng Index is regaining some footing after plunging more than 16% to a four-year low in the first two months of the year.

Looking forward, stabilization in mainland China, faster growth in the U.S., and the Hong Kong government’s increased public spending should provide some relief, said HSBC economist Julia Wang. The Hong Kong government is keeping its forecast for 1-2% growth in 2016, down from 2.4% growth in 2015. But not everyone is so sanguine: Capital Economics forecasts 1% growth, Nomura has slashed its forecast for 2016 growth to 0.8%, and Daiwa has lowered its growth prediction to a mere 0.4% for this year.

--Anjie Zheng and Chester Yung. Follow Anjie on Twitter @anjiezheng and Chester @chester_yung.