GDP drops as shoppers spend less
Updated: 2008-07-23 07:15
By Lillian Liu(HK Edition)
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Causeway Bay is still filled with the usual hustle and bustle, but a lot of those shoppers are going home with fewer bags as high inflation has hurt consumer confidence. AFP |
Hong Kong's economy will expand at a slower pace this year than in 2007, hurt by the mainland's cooling economy and the city's sluggish stock and property markets, economists said yesterday.
Asian Development Bank (ADB) predicted a 4.9 percent growth in Hong Kong this year, given that economic growth showed signs of moderation in the second quarter, and because headline inflation rises sharply as global prices of oil and food surge.
Hong Kong recorded a gross domestic product (GDP) growth of 6.3 percent in 2007, helped by vibrant economies, both globally and on the mainland.
Ben Kwong, head of research at KGI Asia, said that Hong Kong is unlikely to benefit from the global economy in the second half.
"There is too much negative news at home and abroad," he said. "The soaring inflation on the mainland, along with the yuan's appreciation, has led to high inflation in Hong Kong and discouraged consumer confidence."
Hong Kong companies, particularly those in the Pearl River Delta region, are affected by the central government's austere measures, Kwong said.
Hong Kong exports serve as the key driver of the city's GDP, Kwong said. So, as US and European demand for Asian-made products wanes, Kwong believes Hong Kong exports will, too.
He said the regional trade among Asian economies can't offset losses from weakening Western demand.
A recent report by HSBC commercial banking said that Hong Kong's small- and medium-sized businesses are doing well in terms of exporting within Asia.
"The US and European customers place much bigger orders than those in Asia," Kwong said.
But Paul Tang, chief economist at Bank of East Asia, said that the worst signs of an economic slowdown appeared in the first half.
"The economy will recover somewhat in the second half of this year," he said, "and the record-high inflation is expected to drop to as low as 3 percent in the next six months."
The estimated 4.9 percent by ADB was up from its 4.5 percent prediction in April.
The Manila-based lender said economic growth in emerging East Asia will moderate to 7.6 percent in 2008, down from 9 percent in 2007, as the region weathers a global economic slowdown.
A sharp rise in food and energy prices and volatility reigns in financial markets, the bank said in a report yesterday.
The region's slowing, yet solid, growth outlook remains vulnerable to a higher-than-expected spike in inflation, a protracted slowdown in the US and any further tremors in global financial markets, it said.
(HK Edition 07/23/2008 page2)