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TDC: Short war would have limited impact on Hong Kong exports

A war in Iraq would have only limited impact on Hong Kong's exports in 2003, if it is short-lived, according to Trade Development Council's (TDC) preliminary assessment released today (March 20).

TDC's Chief Economist Edward Leung said: "Performance in the second quarter may be sluggish and would probably continue being so in the third quarter of 2003. But if the world economy recovers towards the end of the year, Hong Kong exports would perform better in the final quarter.

"For the year as a whole, Hong Kong exports should post a modest growth of 4%, instead of 4.5% as predicted earlier".

The report says the world economic situation -- affected in part by the US-Iraqi tension -- has deteriorated since late 2002. The IMF trimmed its 2003 world economic forecast to 3.3%, down from its previous prediction of 3.7%, even before any strike on Iraq.

Overseas buyers are also likely to hold back on their orders because of the Iraq situation. This would impinge on Hong Kong's short term export performance.

But despite these unfavourable external factors, Hong Kong exports fared well in the first quarter of 2003.

Hong Kong's exports in January this year soared 27%, due partly to the small base for comparison, and partly because of a rush to meet delivery deadlines.

Although oil prices came down recently, they had been rising since mid-2002, pushing up the cost of plastics raw materials and other petrochemical products, and cutting into exporters' profit margins. Hong Kong exporters are likely to be hit again if high oil prices prevail. Suppliers are reluctant to pass the higher cost on to their customers for fear of losing business.

The report also warned that further tightening of the 24-hour cargo manifest rule imposed by the US to deter terrorist attacks could disrupt trade flow.

For electronics products, while the demand for security and emergency items will remain strong, the sales of telecom and household electrical appliances are likely to be dragged by the weak consumer sentiment.

The clothing industry was also in the doldrums with buyers being hesitant about placing orders, particularly urgent orders that required shipment by air which is costing more these days due to higher oil prices.

However, toy exports might be spared the full brunt of the economic downturn as there are still some months before Christmas, and the economic situation might improve before then.

Watches & clocks exports to countries in the Middle East have temporary been affected by the Iraq situation, but the overall impact on Hong Kong's exports of timepieces is not likely to be substantial, the TDC report said.

Regarding jewellery, buyers were found to be taking longer than usual to make up their minds about placing their orders. The delay would force manufacturers to shorten their production schedules.

Leung said: "In general, overseas consumers will continue to exercise great caution in the way they shop and will look harder for lower prices.

"Overseas importers and buyers will be more demanding this year, exacting price concessions and opting for products with more value-added features".

This new report is available at TDC's Retail Outlets. It can also be purchased through the TDC Bookshop section in the TDC's trade portal: www.tdctrade.com.


For press enquiries, please contact Lawrence Yau of TDC's Corporate Communication and Marketing Department at 2584 4333.

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Content provided by Hong Kong Trade Development Council