Hong Kong’s economy is expected to grow 2 to 3 percent this year amid an uncertain global economic outlook, Financial Secretary Paul Chan Mo-po said in his budget speech on Wednesday.
“Should the external headwinds deteriorate, especially if the US-China trade conflict escalates, global trade, investment and financial markets will be subject to greater shocks,” Chan said. “This will not only affect our exports and asset markets, but also dampen local investments and private consumption.”
He warned that differences between the world’s two largest economies are “deep-rooted” and may persist even if ongoing talks between Beijing and Washington are able to resolve trade issues.
“The fluctuating US-China relations may turn the global economy volatile for some time,” the financial chief said. “Furthermore, trade conflicts will undermine multilateralism and the free trade regime, with far-reaching implications on the global governance system and international order.”
Chan revealed that Hong Kong’s GDP growth slowed from 4.1 percent in the first half of 2018 to 2.1 percent in the second half, placing the annual growth rate at 3 percent. In fact, the economy grew a mere 1.3 percent in the fourth quarter, he said.
For this year, the financial chief estimates that the city’s economy will grow between 2 and 3 percent this year, taking into consideration the benefits from one-off measures and other plans unveiled in the budget.
For the medium term, Chan said the average growth rate is forecast to be 3 percent per annum in real terms from 2020 to 2023, under the assumption that there are no severe external shocks during the period.
Both the headline inflation rate and the underlying inflation rate for 2019 will be about 2.5 percent, he said.
Despite its trade conflict with the US and its internal economic challenges, China still “offers promising development prospects in the long run” Chan said, stressing that the nation is in “an era of the strategic opportunities”.
He also warned of the rise of “nativism and populism” in various countries, which could have a huge impact on the global economy.
“The financial tsunami in 2008 was the most severe economic crisis since the Great Depression in the 1930s. Thanks to concerted global effort, the world successfully averted catastrophic consequences, and the global economy gradually resumed growth,” Chan said.
“However, the growth of the major advanced economies have not yet returned to the levels before the financial tsunami, and still need to rely on ultra-low interest rates or unconventional monetary policies.
“Given that the interest rates remain very low, there would be little room for introducing rescue measures if a major economic or financial crisis was to happen again.”
He said“the rise of nativism nowadays may make an international concerted effort and a swift response more difficult”.
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