Fitch lowers Hong Kong's sovereign rating again, Lin Zheng does not agree: the effectiveness of Hong Kong's epidemic prevention should be considered

Political situation

Author: Zheng Rongdi

2020-04-21 10:55

Fitch, the international rating agency, downgraded Hong Kong's long-term foreign currency issuer default rating from AA to AA-, and the rating outlook turned from negative to stable, lower than Macau.

The Chief Executive, Lin Zhengyue, expressed disappointment and disapproval. He believed that if the epidemic situation is a global pandemic because of the anti-epidemic situation, Hong Kong does not need to take very extreme measures such as the closure of the city in terms of anti-epidemic. Rating agencies should seriously consider this factor.

Lin Zhengyue responded to the rating downgrade before attending the executive meeting this morning (21st), saying that Hong Kong has experienced social unrest for nearly a year, which has affected the confidence of the international community in Hong Kong. She mentioned that in the 2020 Economic Freedom Index report published by the US think tank "Traditional Foundation", Hong Kong lost the top position in the world's freest economy. "The main reason is because of security, not because of doubts about Hong Kong's traditional advantages." .

The investment rating agency Fitch downgraded Hong Kong's sovereign credit rating twice from 7 to "AA-" within 7 months. The rating outlook is stable. Fitch believes that the New Coronary Pneumonia epidemic continues. After the social movement, Hong Kong's economy is facing a second major impact, which will shrink economic activity and increase the unemployment rate. It is predicted that Hong Kong's GDP will decline by 5% this year.

The government has launched two rounds of anti-epidemic measures, with a total scale of 287.5 billion yuan, accounting for 10% of GDP. (Profile picture)

Fitch downgrades Hong Kong's sovereign rating to AA- expects GDP to fall 5% this year

S & P confirms that the US sovereign rating AA + outlook rating is stable

Fitch claims that Hong Kong's banking industry is effective in coping with risks and is not affected immediately by the decline in sovereign ratings

In addition, although the social movement has temporarily cooled down, Fitch believes that the deep social and political differences in Hong Kong have not been resolved, which has increased the uncertainty of the business environment and increased the risk of public dissatisfaction recurring, or further undermined the international community ’s governance , Institutional and political stability. The downgrade also reflects Hong Kong's gradual integration into China's national governance system and its close relationship with China's economy, finance, and sociopolitics.

The Hong Kong government has launched a total of 137.5 billion yuan in relief measures. Fitch predicts that the government's budget deficit for fiscal 2020 will rise to 11% of GDP, which is higher than the estimated fiscal deficit of about 1.5% of GDP in fiscal 2019. By the end of fiscal 2020, fiscal reserves will fall from 40% of GDP to 30% at the end of fiscal year 19.

Credit Rating Agency Fitch Lin Zheng Yue'e