Hong Kong’s economy probably grew at close to the slowest pace since the financial crisis, as record unemployment in the euro area hurt exports and Chinese tourists spent less on luxury goods.
Second-quarter gross domestic product rose 1.2 percent from a year earlier, according to the median forecast in a Bloomberg News survey of 15 economists ahead of data due today. Expansion was 0.4 percent in the first quarter, down from 3 percent in the previous three months and 4.4 percent in the third quarter.
The stalling economy adds to the challenges facing Chief Executive Leung Chun-ying, who took office on July 1 vowing to build a more equitable society as the territory’s wealth gap widened to a record. Thousands of residents have taken to the streets to demand higher minimum wages, direct leadership elections by 2017 and a halt to plans for “patriotic” education in primary schools.
“It’s likely that economic growth will still be as weak as, or even worse than, last quarter,” said Kevin Lai, a Hong Kong- based economist at Daiwa Capital Markets Ltd, whose forecast for 0.5 percent expansion is the second lowest. “One, and perhaps the only, way to bolster the economy is investment in infrastructure but I haven’t seen any increase coming there. What we need to hope for is a rebound in the global economy.”
Hong Kong’s expansion in the first quarter was the lowest since growth resumed in the last three months of 2009 and compared with a 7.6 percent pace in the first quarter of 2011.
The government estimated in February the pace of expansion would drop to 1 percent to 3 percent this year from 5 percent in 2011 and 7 percent the previous year as weak global growth hurt the export-reliant economy. Financial Secretary John Tsang said in July he would make an assessment this month whether the forecast needs to be adjusted in view of the faltering recovery in the US and Europe and slowing growth in Asia.
The city’s imports and exports in June were below all forecasts in analyst surveys. Overseas sales unexpectedly fell 4.8 percent from a year earlier and imports slipped 2.9 percent, a July 24 government report showed.
China COSCO Holdings Co. (1199), the country’s largest listed shipping company, warned its first-half loss probably widened by more than 50 percent, according to a statement to the Hong Kong stock exchange on July 27. The fleet operator cited a “weak” global economy, slowing growth in China and excess capacity that pulled down shipping rates.
“Europe’s debt crisis continues to overshadow trade- dependent Hong Kong,” Joanne Yim, a Hong Kong-based economist at Hang Seng Bank Ltd, said in a telephone interview. “We may see a rebound in the second half on the assumption that Europe has no more bad news.” She estimates second-quarter growth of 1 percent.
Slowing expansion in China is also affecting purchases of luxury items by mainland tourists. While the volume of retail sales rose 8.5 percent in June from a year earlier, sales of jewellery, watches and clocks fell for the second month.
Stanley Lau, managing director of Global Timepieces Ltd, which has six branches in districts such as Tsim Sha Tsui and Mong Kok, said mainland Chinese customers are cutting spending and businesspeople don’t need as many luxury watches to give out as gifts.
Public discontent in Hong Kong is rising as surging property prices make home-buying unaffordable for many, and the conduct of government officials and business tycoons comes under increasing scrutiny. As many as 112,000 protesters took to the streets on July 1 after Leung was sworn in to draw attention to issues ranging from the wealth gap to demands for a higher minimum wage.
Lawmakers have challenged Leung’s credibility as the financial centre’s leader after his home was found to have illegal building structures and his development secretary stepped down to address corruption allegations.
An annual index measuring Hong Kong’s quality of life showed the second-lowest reading since the study started in 2003, according to a centre at the Chinese University of Hong Kong which compiles the gauge. The 2011 index was published last month.
“The public has an impression that the collusion between government and businesses prevents them from sharing the economic harvest,” said Ng Sai-leung, director of the centre for Quality of Life and associate professor of geography.
Residential real-estate prices have jumped more than 80 percent since the start of 2009 on record-low mortgage rates and an undersupply of new units, according to data compiled by Centaline Property Agency, making Hong Kong the world’s most expensive place to own a home.
“Property prices are too high and I won’t think about buying my own apartment,” said accountant Andy Yeung, 33, who pays more than HK$21,000 ($2,710) per month to rent a 800 square-foot apartment in Quarry Bay on the east side of Hong Kong island. “Home prices have to be cooled down, but I’m not sure how the government can do this.”
Category: Hong Kong