16 June 2009
HKTDC Downgrades Hong Kong Export Forecast
Despite Revised Forecast, Survey Shows Improved Export Sentiment
16 June 2009 – The Hong Kong Trade Development Council (HKTDC) has revised downward its forecast for Hong Kong exports, predicting a 10 per cent to 12 per cent drop for 2009.
An article in the latest HKTDC Trade Quarterly (TQ), published today, notes that the revision from the previously estimated decline of six per cent is due to worse-than-expected world trade. The new forecast, in TQ's "Medium-term Prospects for Hong Kong Exports in the Midst of Global Recession," predicts that Hong Kong exports will perform at their lowest level since 1954.
While overseas buyers have begun to place small orders to replenish their merchandise, a more stable external trade environment can only be expected in the second half of the year, according to the HKTDC.
"A drastic inventory drawdown by overseas buyers, amid falling consumer demand and an appetite for low-priced products, has led to the increasing price pressures observed since the global financial crisis emerged," said HKTDC Chief Economist Edward Leung.
The Trade Quarterly report found one bright spot: the HKTDC Export Index, which monitors export performance and prospects of Hong Kong traders, rebounded strongly, to 42.9 for the second quarter, up from 25.8 in the first quarter.
The Export Index, based on a quarterly business confidence survey covering Hong Kong's major industries, may signal a slower rate of contraction in exports. The 21 per cent plunge in Hong Kong exports during the first four months of 2009, however, remains a concern, according to Mr Leung.
"Reduced capital flows and trade credits, subdued asset prices and fragile business and consumer confidence have held back investment, production, consumption and import demand in Hong Kong's traditional markets," said Mr Leung. He added that the decline comes despite various economic relief measures.
"Although emerging economies have also suffered considerably from the crisis, the Chinese mainland is expected to be the first major economy to recover," said Mr Leung. He said China's fiscal stimulus package and loosening bank credits should drive the recovery.
"Hong Kong exports to the mainland have decreased substantially, as such trade is dominated by parts and components for export processing," said Mr Leung.
Hong Kong traders, however, have secured a small number of orders, improving sentiment across the board. In the second quarter, export confidence rose by more than 17 points, the highest level in a year. Looking at electronics, there is some indication that the export contraction may be less severe in the near team. The electronics sub-index grew strongly, to 45.1, and the mainland sub-index rose to 49.9 – almost reaching the threshold for expansion.
Looking ahead, Mr Leung said sales would probably return to normal growth with global economic recovery. This would hinge, however, on normal functioning of the global banking and credit systems, a bottoming out of the United States housing market and a revival of business and consumer confidence in developed economies.
Mr Leung said the global economy could bottom out in the second half of the year, if various rescue initiatives taken by world governments take effect. He said the greatest medium-term challenge was to avoid prolonged global recession. This would mean rebalancing excessive savings in Asia against overspending in the US and other rich countries. Intensified protectionism and the outbreak of human swine flu may also threaten the global economic landscape, Mr Leung added.
Though far from immune to the global crisis, the mainland's consumer market is outperforming its overseas counterparts. For the first quarter of this year, the mainland's retail sales of consumer products grew by 15 per cent, while US results dropped by 10 per cent.
Mr Leung suggested that Hong Kong companies might find domestic sales opportunities in the mainland's inland provinces and second- or third-tier cities, which are less reliant on exports than coastal areas.
A survey conducted by the HKTDC in March found that 33.4 per cent of 500 Hong Kong companies with production, merchandising or marketing activities in the mainland had already begun to do business on the mainland. Among those not yet doing so, more than 30 per cent said they would enter, or will consider entering, the mainland market within the next six months.
Please contact the HKTDC's Corporate Communication Department:
Tel: (852) 2584 4216
About the HKTDC
Established in 1966, the Hong Kong Trade Development Council (HKTDC) is the international marketing arm for Hong Kong-based traders, manufacturers and service providers. With more than 40 offices worldwide, including 11 in the Chinese mainland, the HKTDC promotes Hong Kong as a platform for doing business with China and Asia. The HKTDC also organises trade fairs and business missions to connect companies with opportunities in Hong Kong and the mainland, while providing information via trade publications, research reports and online. For more information, www.hktdc.com