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HK’s jobless rate tipped to hit 4.8% by year-end

By Oswald Chan | | Updated: 2020-01-22 10:03
A view of Russell Street in Causeway Bay, Hong Kong. [Photo by Parker Zheng/China Daily]

Hong Kong's unemployment rate may swell to 4.8 percent by the end of this year when the local economy is tipped to contract 1.5 percent for the full year, economists have warned.

The city's jobless rate from October to December in 2019 surged to 3.3 – the highest level since March 2017 – according to government data released on Monday. The unemployment rate in the consumption- and tourism-related sectors, such as retail, accommodation and food services, remained at a three-year high of 5.2 percent for the same period.

"Hong Kong's economic growth may dive 4 percent in the first half of this year before seeing meager positive growth in the second half. On the whole, the city's economy is estimated to register a 1.5 percent contraction," said Standard Chartered Bank (Hong Kong) Greater China Senior Economist Kevin Lau.

"The jobless rate may soar this year amid signs of an upward trend," he said.

"With China and the United States having signed the first phase of a trade deal, global interest rates are expected to stay at low levels, and the mainland economy is stabilizing. All these factors will support the Hong Kong economy. The only uncertainty comes from the domestic consumption front which is being dragged by weak consumer demand and faltering tourist arrivals," said Lau.

US-based Moody's Investors Service downgraded Hong Kong's credit rating by one notch on Monday to "Aa3" from "Aa2", while overseas direct investment flows into the SAR were reduced by almost half to $55 billion last year, according to a report by the United Nations Conference on Trade and Development.

"The credit-rating downgrade is just one of the factors affecting corporate lending and financing decisions. We've to gauge the effect of the downgrade on Hong Kong as global interest rates are still hovering at low levels. However, the UNCTAD data confirmed that investment activities generated from overseas capital tend to be more cautious amid a slowing Hong Kong economy," Lau cautioned.

The Standard Chartered Hong Kong SME Leading Business Index for the first quarter of 2020 jumped to 33.1 from 31.4 in the last quarter, indicating that SMEs' confidence in the business environment has improved for the first time since the second quarter of 2019. However, the figure is still far below the 50 point gauge, meaning there's pessimistic business sentiment among local small and medium-sized enterprises.

As trade frictions and their impact on global growth continue to spread internationally via supply chains, Moody's expects Hong Kong to face a prolonged economic slowdown as the city's economy relies heavily on trade for growth.

For the industry sub-indices, manufacturing, as well as import/export trade and wholesale sectors, recorded increases, benefiting from the first-phase China-US trade agreement, while the retail sector index still declined – the only industry seeing a quarter-to-quarter drop to a new low level.

The results came from a survey conducted last month, in which executives of 825 SMEs from eight different industries were interviewed.

"Most of the surveyed SMEs remained conservative with their business strategies for 2020, while some said they would adopt a progressive approach, and 85 percent said they would start implementing their strategies in the first half of this year. Their main strategies are to lower operation costs, improve customer services and develop new businesses and products," said Hong Kong Productivity Council Acting Executive Director Lawrence Cheung.

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