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HK posts gloomy GDP figures amid unrest, trade war
HONG KONG suffered a day of tempestuous weather, grim economic news and signs that the city's political crisis is deepening.
Gross domestic product (GDP) contracted 0.3 per cent from the previous quarter, while growth on a year-ago basis remained at 0.6 per cent, according to data released on Wednesday. Both results were well below the estimates of economists surveyed by Bloomberg.
Hong Kong's trade-dependent economy was facing a full-year deceleration even before protests over the government's extradition bill began disrupting business and tourism in June. The data release came after the city's financial markets shut early due to a typhoon, and amid signs that the government is taking a harsher line in punishing protesters.
"The trade war is hurting Hong Kong," said Iris Pang, an economist with ING Bank NV in Hong Kong. "At the same time, into the second half of 2019, we will have protests also damaging the Hong Kong economy through consumption and the job market. It means that we are doubly hit."
On Tuesday, embattled chief executive Carrie Lam addressed international and local chambers of commerce. She said that the territory's economic momentum has weakened in recent months on the US-China trade war and other "uncertainties", according to a statement, while pledging to "spare no efforts" to deal with anti-government protests that risk harming the city's growth.
There is "no room for optimism for the second quarter and the entire year," she said.
"Mrs Lam also said that the disputes in society in recent months are not conducive to Hong Kong's continued development, and that she would spare no efforts to deal with them," said a statement from the city's government that reported her comments. "She pointed out that everyone should continue to have confidence in the city, and she firmly believes that with the concerted efforts of various sectors, Hong Kong would find opportunities amid difficulties."
Figures on Thursday may indicate that retail sales dropped year-on-year for a fifth month in June, with demonstrations and the subsequent police crackdown deterring shopping and tourism.
A tropical storm shut Hong Kong's financial markets for the first time in almost two years, adding extra drama to a city that has been hit by protests for weeks.
The Hong Kong Observatory raised the storm signal to 8 at 1.40 pm local time on Wednesday, the third highest level on its scale. That prompted the city's stock exchange to suspend trading 15 minutes later, as required by its rules. The Hang Seng Index, which normally closes after 4 pm, ended the session 1.3 per cent lower.
Signs are emerging that the ongoing unrest is damaging economic confidence, tourism and retail sales. The Hong Kong Retail Management Association said this month that "most members" reported a single-to- double-digit drop in average sales revenue between June and the first week of July, when multiple demonstrations converging on major office and retail districts took place.
The "industry is worried that these events will damage Hong Kong's international image as a safe city, a culinary capital and a shopping heaven," the association said in a statement.
Small businesses in the city have also become much more pessimistic, with a sentiment index of small and medium companies dropping to the lowest in the seven years that the survey has been conducted. The attitude of companies towards investment, sales and profits all declined, as did all nine industry sub-indices, according to the results of the survey by Standard Chartered plc. BLOOMBERG