HK: Cutting GDP Forecast On Trade War Woes

13-Aug-2018 Intellasia | Seeking Alpha | 6:02 AM Print This Post

Hong Kong GDP growth in 2Q was weaker than expected, which could be an early sign of the negative impact from the bilateral trade war between Mainland China and the US. The linked exchange rate system adds further pressure and the government must spend its big fiscal surplus to cushion the impact

GDP grew 3.5 percent YoY in 2Q18, as expected

The moderate but slower than expected growth in 2Q18, at 3.5 percent YoY in 2Q from 4.6 percent in 1Q, mainly came from consumption, which contributed 4.3 percentage points to growthoffset by the net trade deficit.

Investment was weak, growing only 0.4 percent YoY, indicating that high house prices have deterred further real estate development.

Consumption continued to be the main growth driver

Future growth could be weaker amid trade war

Over 50 percent of trade in Hong Kong is related to Mainland China, so a bilateral trade war between China and the US will negatively affect Hong Kong’s trade, logistics, and ports.

From the Statistics Department of Hong Kong, employment in trade and logistics was near 20 percent of total employment in 2016. Even accounting for a slowdown in the sector, as competition from the Mainland has been fierce, we believe that the proportion is still at least 15 percent. These workers face the possibility of lower salaries or even losing their jobs. And while the overall labour market is currently solid, with unemployment at 2.8 percent, employees in this sector could turn to low skilled work, which would put at risk the salary trend of low-income labour.

https://seekingalpha.com/article/4197614-hong-kong-cutting-gdp-forecast-trade-war-woes

 


Category: Hong Kong

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