Hong Seng Bank of Hong Kong has reduced its forecast from1.5 percent to 1.3 percent for Hong Kong economic growth in 2016. This is caused by the UK’s vote to leave European Union. This has cast a shadow on the investment and consumption confidence of businesses and households as well as on the outlook for the SAR’s trade performance.
Regardless ofpartial direct trade between the UK and Hong Kong, the city could be undesirably affected by the UK’s decision to leave the European Union if the global economy slows as a result, conferring to Hang Seng’s report Shortcoming Risks to Hong Kong Economy.
Households and businesses may also become more cautious aboutconsumption and investment following Brexit, the report says.
“Although Hong Kong’s retail performance showed an improvement, with year-on-year decline narrowing from 11.2 percent in the first quarter to 8.4 percent in April-May, the underlying picture remains weak”, the report says.
Retail sales of purchaser durables fell by almost 21 percent in the month of May, demonstrating the biggest plummet since February, and the number of continental visitors fell by 8.3 percent year-on-year in May, a larger drop than April’s 4 percent.
These factors mirror that tenacious global economic hesitation and the financial market are affecting household expenses activity, the report says.
Rendering to the report, the recent progressive performance of Hong Kong trade flows, in which export showed a slower year-on-year debility of 0.1 percent in the month of May, matched with a 2.3 percent fall in April, is more recognized to higher commodity prices than to stronger global economic growth, citing adequate growth in the Eurozone and the US.
“Without a pickup in growth in these economies, which are the leading markets for Asian exports, Hong Kong’s trade growth is unlikely to be sustainable,” the report says.
“While upcoming economic data for the second half of the year could be volatile and even surprise on the upside due to a low-base effect that could result from the slowdown in activity in the second half of last year, the key factor in assessing the economic outlook is the underlying trend, which is currently indicating further slowdown.”