Many financial institutions are bearish on Hong Kong’s economy for the second half of this year, as the Hong Kong Special Administrative Region government prepares to announce its advance estimates for the third quarter on Thursday.
Major investment banks have further downgraded Hong Kong’s GDP forecast for the third quarter and for the full year of 2019. Most have cut their forecasts to “negative”, citing lingering social unrest and the weaker-than-expected economic performance of the past two months.
The downturn in the third quarter is the result of heavy losses in exports and weak domestic consumption ... the city’s GDP has fallen for two quarters in a row, reflecting the economy has entered recession already
Paul Tang Sai-on
Bank of East Asia chief economist
Bank of East Asia estimates the special administrative region’s economy will drop 1 to 1.5 percent for the third quarter, while it will dip 0.3 percent for the full year.
The downturn in the third quarter is the result of heavy losses in exports and weak domestic consumption, Bank of East Asia Chief Economist Paul Tang Sai-on said during a media interview.
The latest official figures show that Hong Kong exports shrank 7.3 percent year-on-year in September. In terms of volume, the decline in the third quarter could be more than 7 percent, the biggest quarterly decrease in a decade.
Tang said the city’s GDP has fallen for two quarters in a row, reflecting the economy has entered recession already. But he believes the financial market is unlikely to collapse, and asset prices will not plunge now.
Earlier this month, Morgan Stanley cut its forecast for Hong Kong’s real GDP growth in 2019 from a 0.3 contraction to a drop of 0.8 percent.
The New York-based multinational investment bank and financial services group predicted the city’s economy could decline 1.9 percent year-on-year in the third quarter – the worst figure in a decade.
The government did not rule out the possibility of a negative growth for the full year, as Financial Secretary Paul Chan Mo-po said in his blog on Sunday that it seems it will be extremely difficult to reach full-year economic growth of zero to 1 percent.
Chan said the government had rolled out various measures to help tourism, trade and retail sectors and will continue to work on that, but the real problems can be solved only by various sectors uniting and ending the violence on the streets.
Morgan Stanley believed these measures unveiled by the government will work gradually. Thus, the investment bank forecast Hong Kong’s economy would recover and grow at 0.8 percent in 2020.
The International Monetary Fund also expects GDP to grow by 0.8 percent next year, supported by the government's stimulus measures.
Moreover, the IMF forecast Hong Kong’s GDP growth will just slow to 0.3 percent in 2019 rather than a negative growth.
In its projections in April, before the turmoil in the city intensified, the IMF had forecast that Hong Kong would grow at 2.7 percent this year.
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