Hong Kong Business Forecast Report Q3 2009

Publication Date	June 2009
Publisher	Business Monitor
Product Type	Report
Pages	62
ISBN Number	1745-056X
Product Code	BMI03940

Buy this product or for assistance call +44 20 7060 7474

PDF £250.00$416 | €280

FAX Order above formats by FAX

Summary

A sharper-than-expected contraction in real GDP in Q109 has prompted BMI to revise down its 2009 growth forecast for Hong Kong. Real GDP contracted by a greater-than-expected 7.8% yo- y (4.3% q-o-q) in the first three months of the year, accelerating sharply from the 2.6% decline registered in the previous quarter as private consumption, investment and exports all plummeted in line with a deepening global recession. Although the worst may now be over, we caution that it will nonetheless be a long and painful road back to recovery. As such, having previously expected the economy to contract by 3.6%, we are now anticipating a 5.7% fall in real output - in line with the government's new forecast for a 5.5-6.5% contraction.

Due to the current dire sate of the economy, the annual July 1 march for democracy is likely to see a bumper turnout as citizens vent their growing frustrations with the government. Meanwhile, the Lehman Brothers's mini-bonds scandal in September 2008 and the recent privatisation of telecom firm PCCW will also help to draw a large crowd. Nonetheless, numbers are still likely to be below the record 500,000 witnessed in 2003, and with the threat of social unrest in the mainland continuing to rise, the planned demonstration is likely to have little impact.

Although the pace of export declines moderated slightly in March, Hong Kong's exporters will continue to face a tough time in 2009 as global growth continues to weaken. In addition, with exports forecast to fall more sharply than imports, the Special Administrative Region's current account will come under pressure. However, at an estimated 9.5% of GDP, we highlight that Hong Kong will still retain a significant current account surplus. Meanwhile, Hong Kong's narrow tax base will be cruelly exposed during the current downturn, meaning that the government will remain rather hamstrung with regards to providing fiscal stimulus to the economy.

The recent decision by a Hong Kong appeals court to overturn a previous ruling by the High Court and block the HKD15.9bn (US$2.2bn) privatisation of phone company PCCW by its largest shareholder, Richard Li, has brought the competency of the territory's regulators into question. Having said this, Hong Kong still ranks among the most business-friendly places in the world, according to BMI's business environment ratings. Indeed, Hong Kong's impressive score of 90.7 (out of 100) for market orientation helps push its overall score to 82.2, placing it third out of 167 countries in BMI's business environment ratings.

Content

Executive Summary
- 2009 Set To Be Worst Than First Feared
Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Ratings
- Domestic Politics
- Bumper Protest Turnout Unlikely To Force Change
- Due to the current dire state of the economy, the annual July 1 march for democracy is likely to see a bumper turnout as citizens vent their growing frustrations with the government
Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Ratings
- Economic Activity
- 2009 GDP Growth To Be Worse Than First Feared
- A sharper-than-expected contraction in real GDP in Q109 has prompted BMI to revise down its 2009 growth forecast for Hong Kong
- Fiscal Policy
- Narrow Tax Base To Constrain Fiscal Stimulus
- Hong Kong's narrow tax base will be cruelly exposed during the current downturn, meaning that the government will remain rather hamstrung with regards to providing fiscal stimulus to the economy
- Balance Of Payments
- Current Account Surplus To Shrink, But Remain Solid
- Although the pace of export declines moderated slightly in March, Hong Kong's exporters will continue to face a tough time in 2009 as global growth continues to weaken
- Investment Climate
- Property Market Slump Has Further To Run
- Although favourable financial market conditions and initiatives by the government to support the sector are likely to provide a cushion to Hong Kong's residential property market, they will not be sufficient to offset the negative impact of deteriorating demand dynamics as the economy remains in deep recession
Chapter 3: 10-Year Forecast
- The Hong Kong Economy To 2018
- Integration With Mainland Key To Growth
- Hong Kong's long-term outlook remains reasonably bright
Chapter 4: Special Report
- The Outlook For Global Banking
- Business Environment Rating Outlook
Chapter 5: Business Environment
- SWOT Analysis
- BMI Business Environment Risk Ratings
- Business Environment Outlook
- Institutions
- Infrastructure
- Market Orientation
- Operational Risk
Chapter 6: Key Sectors
- Retail
- Executive Summary
- Growth in regional retail sales for the period 2007 to 2013 is put by BMI at 181%, or an average 19.3% per annum
- Consumer Electronics
- Executive Summary
- Hong Kong's domestic consumer electronics devices market, defined as including computing devices, mobile handsets, and video, audio and gaming products, was estimated to be worth around US$3.4bn in 2008
Chapter 7: BMI Global Assumptions
- Global Assumptions
List of Tables
- Table: Politica l Overview
- Table: ECONOMIC ACTIVITY
- Table: FISCAL POLICY
- Table: BALANCE OF PAYMENTS
- Table: Long-Term Macr oeconomic Forecasts
- Table: LO AN-TO-DEPOSIT RATIOS, Selected States
- Table: LO AN GROWTH (% CHG Y-O-Y), Selected States
- Table: COMMERCIAL BANKING BUSINESS ENVIRONMENT RATINGS, SELECTED STATES
- Table:BMI BUSINESS AND OPERATIONAL RISK RATINGS
- Table:BMI LEGAL FRAMEWORK RATINGS
- Table: Asia, FDI Annua l Inflows
- Table: BMI TRADE RATINGS
- Table: TOP EXPORT DESTINATIONS
- Table: Key Retai l Indicat ors, 2006-2013
- Table: Consumer Electronics Overview
- Table: GLO BAL ASSUMPTIONS
- Table: GLO BAL & REGIONAL REAL GDP GROWTH
- Table: EMERGING MARKETS
- Table: COMMODITIES