HK in economic abyss as holiday crowd skips city

A slump in visitors to Hong Kong during the first week of October, normally dubbed as the Golden Week for tourists, came as the latest signal that an upheaval that has lasted since June is plunging the city into an economic abyss.

“Visitors to Hong Kong halved from a year earlier during the first week of October and the employment in the tourism sector is worrying,” said Edward Yau, secretary for commerce and economic development of the Hong Kong Special Administrative Region government.

Tourism was not the only sector falling victim to violent incidents since June.

Analysts have pointed out that a wide range of industries from retail to catering are embracing a chilly winter as the continued unrest has added huge pressure on the financial and trade hub that had already been grappling with the impact from a global economic downturn since last year. For example:

Hong Kong’s exports fell 6.3 percent year on year in August, the 10th straight decline.

Retail sales tumbled 23 percent from a year ago in August, the sharpest monthly drop on record, marking a six-month losing streak.

The dropping of visitors has been widening since July and about 40 countries and regions have issued warnings concerning travel to Hong Kong.

An official index measuring the willingness to invest of small and medium-sized enterprises saw a steep drop in August to 32.1, the lowest reading since the index started to be published in 2011.

And private home prices had fallen for three months in a row till August but the vacancy rate of office buildings rose to a five-year high.

“When exports, retail sales and even investment are weak, it is hard to be optimistic about the performance of the overall economy,” Paul Chan, financial secretary of the HKSAR government said.

“If the quarter-on-quarter growth rate turns negative again in the third quarter, Hong Kong’s economy will fall into a technical recession.”

Chan added that the market has already had a pretty clear idea about the current situation although the official figures have yet to be released.

HKSAR government economist Andrew Au said shrinking consumption will also lead to a further drop in investment, contributing to even more feeble inner growth impetus.

Both the University of Hong Kong and DBS Bank have predicted zero growth for Hong Kong this year in their respective reports, and rating agency S&P revised down Hong Kong’s economic growth forecast for this year from 2.2 percent to 0.2 percent earlier this week.

Observers warned that the real challenge for Hong Kong will come when the jobless rate starts a hike.

Hong Kong’s overall unemployment rate has inched up 0.1 percentage point to 2.9 percent, with the rate of retail, accommodation and catering up markedly to 4.6 percent.

The HKU said in a report that the situation could continue to worsen and residents were much less confident in the job market.

Hong Kong is facing a more severe situation than any other previous crises including the SARS, HKSAR Chief Executive Carrie Lam said, stressing that the economy will be affected for a long time and the recovery will also be arduous.

The HKSAR government has carried out an array of pro-growth policies since mid-August, including a scheme worth HK$19.1 billion (US$2.44 billion) to relieve the burden on businesses and individuals amid the economic hardship.