Hang Seng Bank makes bleak forecast for SAR economy
Updated: 2008-12-05 07:36
By Kwong Man-ki(HK Edition)
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A shoe trader cleans shoes in his shop in Hong Kong. Evidence is mounting that many local retailers are feeling the pinch of economic slowdown. AFP |
The Hong Kong economy will make no major rebound despite efforts by central banks and governments around the world to revive economic growth, and the city will see only zero growth throughout 2009, said Hang Seng Bank in its latest report - Hong Kong Economic Monitor.
The Hong Kong economy has slipped into recession after the city reported a 1.7 percent GDP growth in the third quarter. That was the second consecutive quarterly contraction this year.
Moreover, Hang Seng said, the worst is yet to come.
The bank's economists expect the unemployment rate to go up and consumer spending to contract further.
The negative wealth effects caused by the sharp correction in the local stock and property markets will deter consumers from spending. Rising prices are another reason why consumers are spending significantly less these days, said the bank in its report.
The economists cited the fact that there was a 4.6 percentage-point gap between value and volume growth in October. In other words, consumers are purchasing the same amount of goods at a higher value.
"The outlook is more pessimistic," Hang Seng's economists wrote, "the negative wealth effects, deteriorating income and job prospects will continue to weigh heavily on consumer spending."
Hang Seng has revised down the retail sales volume growth to 4 percent in 2008 and a 4 percent contraction in 2009.
Hong Kong's exports growth has also been on a clear downturn, though total exports unexpectedly rose 9.4 percent in October. Hang Seng expects total exports to fall soon as many of Hong Kong's major export markets are already in recession.
Looking forward, Hang Seng believes that the economic stimulus packages announced by countries around the world will start showing their impact on the real sector in the second half of 2009. The bank projects a mild export growth of 3.5 percent for next year.
Hang Seng expects the employment market to worsen as well, predicting the unemployment rate to hit 4.3 percent by the end of this year, it was 3.5 percent in October.
"The labor market has just started to reflect the adverse impact of the deteriorating business condition," the economists said, "Corporate bankruptcies and job cuts look set to surge."
Hang Seng predicts that the unemployment rate will climb further to 5 percent in mid-2009.
(HK Edition 12/05/2008 page2)