Coronavirus: more economic pain ahead HK’s finance chief says, as he predicts gloomy outlook for global economy

31-Mar-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

Hong Kong’s financial chief has predicted the global economy will contract in the first half of the year on the back of the coronavirus pandemic, and the city is unlikely to repeat the quick rebound it managed after the severe acute respiratory syndrome (Sars) outbreak in 2003.

Financial Secretary Paul Chan Mo-po also said the city’s retail sales results, expected on Tuesday, would continue to slump as the pandemic would weaken economies locally and globally in the coming months.

In an official blog post published on Sunday, the financial secretary warned the outbreak could inflict longer economic pain than Sars, because it would continue to hit economies for another year or until vaccines are ready in use in the middle of next year, as has been suggested by local health experts.

“In other words, a rapid rebound of Hong Kong’s economy after Sars in 2003 is unlikely to repeat this time,” he said.

The Sars outbreak, which in Hong Kong sickened 1,755 people and claimed 299 lives over 122 days, abruptly derailed growth in the second quarter in Hong Kong, but the city experienced a V-shaped economic recovery, as the economy grew by 3.3 per cent that year, faster than the 2.3 per cent growth in 2002.

The Closer Economic Partnership Arrangement (CEPA) between Hong Kong and mainland China, which was initiated by Beijing in 2003, also helped the city’s recovery by boosting inbound tourism, the local labour market, and investment spending.

But Chan warned that unlike previous shocks in the global market that were triggered by financial turbulence, the coronavirus had interrupted the global production, trade and supply chains, and had seriously hit the real economy.

“Many people have felt acute pain,” he wrote. “But the market will inevitably experience greater psychological shock as more relevant figures are released.

“It seems to be a foregone conclusion that the global economy will contract in the first half of the year.”

Chan’s views are more pessimistic than a month ago when he delivered the 2020-21 budget, and said the “economy of Hong Kong should be able to recover once the epidemic is over Hong Kong’s as economic fundamentals remain solid”.

Sources said that prediction was based on government economists’ projection that the economy in Hong Kong could expect a V-shape rebound once the epidemic was over. At the time, the total number of confirmed cases was 85,000 globally, with most of them reported in China.

The virus has now infected more than 664,000 people worldwide, and has killed over 31,000. In Hong Kong, the number of infections rose to 641 on Sunday, and there have been four fatalities.

On Sunday, Chan said while it would be “unrealistic” to expect the epidemic to be over soon, the government would concentrate its efforts on how to minimise harm to the real economy, while maintaining certain public services and economic activities.

He said the government was considering a second round of relief measures under its anti-epidemic fund for businesses and residents affected by social distancing measures. But no details were revealed in his blog.

Under Hong Kong’s new regulations to limit public gatherings to four, restaurants and bars face pressure to sack employees and close their businesses.

As one of the hardest-hit sectors by the epidemic, the catering sector’s jobless rate spiked to 7.5 per cent from December to February, much higher than the average 3.7 per cent for the entire economy.


Category: Hong Kong

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