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Update on the Hong Kong Economy for The Task Force on Economic Challenges Government Economist 8 December 2008. Global/local developments since last meeting. Global financial market strains eased somewhat; risks of meltdown receded for the time being Local interest rates also down
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Update on the Hong Kong Economy for The Task Force on Economic Challenges Government Economist 8 December 2008
Global/local developments since last meeting • Global financial market strains eased somewhat; risks of meltdown receded for the time being • Local interest rates also down • But global credit market still not functioning...
Concern about global financial meltdown eased, but credit markets still tight
Local interbank rates down…but banks still cautious in lending
… leading to a further mark-down in global economic growth forecasts
Banking sector under pressure in a number of ways: • Income : Contraction in loan balance; Non-interest income withering amid falling demand for investment products • Loss provisions and charge-offs : Provision for losses on investments; Non-performing loan; Falling property prices leading to more negative equity cases • Operational pressure : Liquidity / capital demand from foreign / Mainland branches; Lehman-related issue; Structural changes leading to higher compliance and operating costs
Financial sector activities already slowing markedly since early 2008
Partly due to sharp declines in IPO activity and stock market turnover ……
Financial services sector: unemployment/vacancy* * Private sector vacancies posted by the Labour Department.
Export outlook is grim 2003 SARS Current global crisis 2001 global downturn 1998 AFC
Trading and logistics: unemployment/vacancy* * Private sector vacancies posted by the Labour Department.
Tourist number remains on a decline; Retail sales down in October 1998 AFC Current global crisis 2001 global downturn Current global crisis 2003 SARS 2001 global downturn 2003 SARS 1998 AFC
Tourism and consumption-related sector: unemployment/vacancy* * Private sector vacancies posted by the Labour Department.
Property market down further; Transactions fell back to 2003 average 1998 AFC 2001 global downturn Current global crisis 2003 SARS
Construction sector output remainson a downtrend 2001 global downturn 2003 SARS 1998 AFC Current global crisis
Real estate and construction sector: unemployment/vacancy* * Private sector vacancies posted by the Labour Department.
Our latest assessment • Global economy in a dire state; timing of recovery still highly uncertain • HK’s GDP growth likely to turn negative in 2008 Q4 and 2009 H1 • Recession in 2009 seems inevitable given the recession in advanced economies and ensuing drag on Asia • China still a positive factor for HK, esp with series of measures to boost domestic demand and forestall severe export slowdown
Measures to mitigate the impact : • Ensure banking sector liquidity and monetary stability • SME loan guarantee schemes • Job creation initiatives • Increase minor construction projects and speed up infrastructure projects where possible • CPG’s support for HKSARG