The second quarter GDP fell 9% year-on-year, worse than expected, scholars urge the government not to provide subsidies

Special interviews

Written by: Kuang Yueting and Hu Xueneng

2020-07-29 18:27

Hong Kong’s economy retreated 9% in the second quarter of this year, which was worse than market expectations. During the period, private consumption expenditure fell by 14.5%, worse than the 10.6% drop in the first quarter. The government has made it clearer that although the economies of the United States and the Eurozone seem to have bottomed out, the path of recovery may be slow and bumpy before effective vaccines or treatments appear.

However, the government is not underestimating the economic prospects of Hong Kong. It believes that as long as the local epidemic is brought under control and the external environment continues to improve, the Hong Kong economy is expected to gradually recover in the rest of this year. Economists also agree that Hong Kong's economic performance depends on changes in the epidemic.

Since the 29th, restaurants will suspend the provision of dine-in meals throughout the day, and Mr. Chuang Tai expects private consumption to fall further in the third quarter. (Photo by Yu Junliang)

Zhuang Tai weighs 6% year-on-year economic decline in the third quarter

Zhuang Tailiang, associate professor of the Department of Economics at CUHK, said that the decline was lower than expected, mainly due to the intensified decline in private consumption expenditure and fixed capital, as well as the increase in government consumption expenditure. Fortunately, the current Hong Kong economy is still recording a single digit. The decline was better than the 48.7% year-on-year decline of Macau’s economy in the first quarter, and the 12.6% year-on-year decline of Singapore’s economy in the second quarter.

Zhuang Tailiang estimated that the Hong Kong government’s ban on dine-in will further reduce private consumption spending. %, because the economy has shrunk by 2.9% in the third quarter of last year. With a low base, the year-on-year decline in the third quarter is expected to be less than that of the second quarter.

He estimated that Hong Kong’s economy would fall by about 7% throughout the year. He also pointed out that with limited resources, the government should no longer subsidize various industries. Instead, when the epidemic improves, it will withdraw restrictions on social distancing and switch them back on again. Let the economy recover.

Zhuang Tailiang, associate professor of the Department of Economics at CUHK, said that whether the tide of local bankruptcies and unemployment will intensify depends on whether the government will tighten its anti-epidemic policy. (Profile picture)

DBS expects a drop of less than 10% in the third and fourth

quarters, said Xie Jiaxi, an economist at DBS Bank (Hong Kong) Economic Research Department, that the GDP decline in the second quarter was worse than expected, as the epidemic improved at the end of May and early June this year, unexpectedly quarterly It still has to fall more than 0.1%. In the second quarter of this year, private consumption actually fell by 14.5% year-on-year, which was worse than the bank's expectation. It believed that as the epidemic improved in June, public spending on the streets increased. As a result, the decline recorded in the previous quarter intensified.

DBS Xie Jiaxi pointed out that tightening social restrictions will have an impact on GDP. (Photo by Ou Jiale)

In terms of total local fixed capital formation, it is believed that it has fallen by 20% year-on-year due to the poor economic environment. Service exports fell by 46.6% year-on-year due to the complete suspension of the tourism industry, which is an exaggerated decline.

Looking ahead to the GDP this quarter, he said that although the tightening of social restrictions will affect GDP performance, it is expected that the year-on-year decline will not be 10% or more due to the low base effect of the third and fourth quarters of last year.

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