Editorial : Deep in recession, hard path ahead

【明報專訊】HONG KONG'S economy is mired in recession amid the COVID-19 pandemic. The gross domestic product (GDP) has suffered its worst decline on record, shrinking by 8.9% year on year in the first quarter according to the government's estimates. From consumption, to investments, to exports, the economy has ground to a halt across the board. Exports of services have even slumped by nearly 40%, a collapse that reflects the heavy toll on the city's inbound tourism. The GDP is a lagging indicator. The crux of the matter is when the recession will bottom out and whether the economy will rebound or continue to languish at a low level. As the pandemic has eased in Hong Kong in recent days, it is possible that the anti-pandemic measures may be relaxed later, thus giving a boost to the consumer market. However, the recovery of the economy also depends on how the pandemic goes and the political-economic situation outside Hong Kong as well as the local political and social situation. As it is unlikely that the pandemic-stricken Western countries will see a V-shaped economic rebound, it is difficult for Hong Kong exports to recover in the short term. The escalation of Sino-US confrontation and the looming recurrence of local political storms also cast a shadow over the path to recovery. A big question mark remains as to whether the Hong Kong economy can come out of the bottom in the second half of this year.

Hong Kong's economy has been hit by the impacts of the Sino-US trade war, the anti-extradition storm and the pandemic in recent months. These impacts have come one after another with increasing devastation. Consumption, investments, exports and public expenditure are the four main components of the GDP. The city's economy began to decline in the middle of last year. The continued weakness of domestic and external demands has led to an across-the-board fall in consumption, investments and exports. Even though the government has kept increasing its spending to "support the economy and safeguard jobs", such efforts have been unable to reverse the situation. The city's unemployment rate in March reached 4.2%, the highest in ten years. The GDP has contracted for three quarters in a row and the decline has been larger and larger. The government has announced that the GDP of the first quarter of this year dipped by 8.9% year on year and shrank by 5.3% quarter on quarter. Both figures are the biggest drop on record, even worse than those during the 1998 Asian financial crisis and the 2008 global financial tsunami.

The first confirmed case of COVID-19 in Hong Kong was reported at the end of January. The pandemic in Hong Kong reached its peak at the beginning of April. The city's second wave of infections, caused by the outbreaks in Europe and America, has taken a heavier toll on its economy than the first wave. Such impact is only partly revealed in the GDP figures of the first quarter. In order to deal with the second wave of outbreaks, the authorities rolled out a series of measures at the end of March. They included tightening quarantine requirements for inbound travellers, mandating social distancing, regulating restaurants, ordering suspension of businesses for high-risk venues and so forth. Although these anti-pandemic measures have proved to be largely effective, they have also come at huge social costs. To have a glimpse of the severity of the impact of those measures on the economy and people's livelihood, we have to wait for the GDP figures of the second quarter. It will be very lucky for Hong Kong if it turns out that the GDP contraction slows down in the second quarter.

Financial Secretary Paul Chan Mo-po describes the city's economy as "deep in recession" right now. A closer look at the breakdown of the first quarter's GDP reveals something shocking and dreadful. Chan's expectation that Hong Kong will come out of the bottom gradually towards the end of this year if the global pandemic situation improves is, to a certain extent, only wishful thinking. The global economy is facing a reshuffle after the pandemic. Great changes may come up in areas from supply chains to the interconnectivity of countries. Similarly, there might be many changes in the local political and social landscape. In the face of huge uncertainty in Hong Kong's economy in the second half of the year, perhaps one can only pray for good luck.

明報社評2020.05.05:深度衰退內外交困 走出谷底前路艱難






mired in sth : in a difficult or unpleasant situation that you cannot escape from

grind to a halt : to go slower gradually and then stop completely

across the board : applying to all

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