Financial Secretary Paul Chan Mo-po warned on Monday that the special administrative region government faces a budget shortfall for the first time in 15 years because of the recession. This can be seen as a warning to local residents to prepare for some tough times ahead.
The deficit warning is the latest sign of a deteriorating Hong Kong economy, which has suffered setbacks on almost all fronts, as the latest data show.
Retail sales suffered a record decline in October, dropping by 24.3 percent from a year earlier, the fourth month of double-digit declines. The export of goods was down 7.1 percent in the third quarter, while export of services fell by 13.8 percent, the biggest drop since the second quarter of 2003. Overall investment expenditures plunged 16.3 percent, and home prices retreated by 5 percent in October from May.
These are the results of a double whammy that has hit the city over the past year, particularly since June. The prolonged Sino-US trade disputes have no doubt had quite a negative impact on exports and investment. But it is the persistent social unrest that has dealt a fatal blow to many other aspects of economic activity, including consumption, tourism and investment.
Inbound tourism has been especially hard-hit by the violent protests. Visitors, particularly those from the Chinese mainland, have been upset by the animosity from radical protesters. As a result, reports of workers in the hospitality sector being forced to take non-voluntary leaves are no longer considered big news.
Other sectors have not fared any better. Small and medium-sized enterprises are particularly vulnerable, with quite a few struggling and on the verge of going out of business.
To the comfort of Hong Kong people, the employment rate has remained relatively low. But it is just a matter of time before it will start rising rapidly, as many economists have warned. This is conceivable. The full impact of the violent protests on jobs will emerge in a few months. Indeed, some economists and business leaders have forecast a wave of layoffs after the Lunar New Year holiday in January.
Hong Kong’s economy is arguably in a bad shape that has been unseen for years. It could slide into the worst recession in decades unless the social unrest can be stopped to allow order and peace to be restored immediately. Otherwise, the stakes are high for everyone who lives in the city.
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