A container ship from Hong Kong unloads cargo in Europe. Confidence about exports has declined to a two-year low in the fourth quarter of 2011, as the HKTDC Export Index slipped to the lowest record since 2009. Robert Francois / AFP

US, eurozone to act as a drag on city's 2012 export growth

Hong Kong's exports will decline by 3 percent in volume next year, against an expected 2 percent growth this year, as the deteriorating European debt crisis and the sluggish recovery in developed economies curb consumer expenditure, the Hong Kong Trade Development Council (HKTDC) forecast Thursday.

Confidence about exports have declined to a two-year low in the fourth quarter of 2011, as the HKTDC Export Index, which measures current export performance of Hong Kong traders and gauges their near-term prospects, has slipped to a reading of 40.6 for the quarter - the lowest since 2009.

The fourth-quarter export index is also the second below-50 reading in the past two years, suggesting negative sentiment for the sector. The index stood at 55.8 and 53.8 in the first two quarters of 2011 before sliding to 49.5 in the previous quarter.

HKTDC Chief Economist Edward Leung said the deteriorating export confidence reflected the prevailing pessimism in the city's export sector, given the slower-than-expected recovery in the US and the deepening sovereign-debt crisis in the eurozone as the world economy braces for a renewed downturn in 2012.

"While all major industries (among the export index) reported their lowest readings in two years, the sub-index for the mainland also fell, to 49.5, the first time below 50 in two years," Leung told a media briefing on Thursday.

Import demand in most traditional markets will be subdued due to slowing US growth and fiscal austerity in Europe.

The manufacturing environment is also challenging for most firms on the mainland as they will continue to confront issues including higher wages and the appreciation of the yuan, with most finding it hard to pass rising costs on to consumers, according to HKTDC.

According to the city's Census and Statistics Department, total exports during the first 10 months of 2011 have grown by 11.3 percent, among which the eurozone gained 8.1 percent compared with the same period in 2010 while the US only grew by 0.4 percent.

Kevin Lai, an economist at Daiwa Capital Markets said HKTDC's export forecast is in line with the fact that the eurozone economy will further deteriorate next year, which will inevitably stymie demand for imported goods in the region.

"We forecast that the GDP growth in the eurozone will decrease by 0.2 percent in 2012," Lai told China Daily in a telephone interview.

The value of total exports is only estimated to gain a tepid 1 percent in 2012, versus an expected 10 percent this year. HKTDC's Leung said growth in value terms is likely to be positive because the price of goods is also expected to increase next year.

A Hang Seng Bank report released early December said Hong Kong's export will become the "hardest hit" in 2012 as the downturn in the global industrial cycle will drag Asia's exports lower.

Intra-Asia trade is also forecast to further weaken as it is largely a related production chain with final demand coming from developed countries, according to the bank.

litao@chinadailyhk.com

China Daily

(HK Edition 12/16/2011 page2)