Hong Kong's economic growth will rebound slightly to 1 percent in 2020, as improvement in the external environment could benefit the city's economy, credit rating agency Fitch Ratings said on Wednesday.

The signing of the long-awaited, phase-one trade deal between China and the United States last week has reduced the downside risks of a renewed escalation in the dispute, said Stephen Schwartz, head of Asia-Pacific sovereigns at Fitch.

Schwartz said he did not expect the city's economy to have a robust recovery this year, as the local social incidents took a heavy toll on many sectors in 2019.

Hong Kong slipped into a recession in 2019 — the first time in a decade. The city's GDP dwindled 2.9 percent in the third quarter, recording negative economic growth for two consecutive quarters.

Schwartz said the city's economic outlook still depends on whether the social unrest will be resolved soon and when tourists will return to Hong Kong.

Citing the social unrest, which has lasted more than seven months, rating agency Moody's downgraded Hong Kong's credit rating one notch to Aa3 from Aa2 on Monday.

Schwartz did not say whether Fitch will follow Moody's and lower its Hong Kong credit rating further. But he adds the city's credit rating is facing downward pressure and that Fitch will review it over time.

In September, Fitch cut Hong Kong' sovereign rating form AA+ to AA and moved its outlook from stable to negative, making Hong Kong the only economy with a "negative" outlook in the Asia-Pacific region.

At that time, Fitch explained the city's persistent unrest has damaged international perceptions of governance, and called into question the stability and dynamism of the SAR's business environment.

The negative outlook signals the likely direction of the rating in the next one to two years, Schwartz said.

But he added that the SAR government has progressively announced a number of fiscal measures to support the economy, and the large fiscal reserves will help with the economic growth outlook. Currently, Hong Kong's fiscal reserves account for 40 percent of its GDP, reflecting the city's strong economic buffers.