Hong Kong's Lam Sees No Room for Optimism as GDP Data Awaited

(Bloomberg) -- Hong Kong's economic headwinds from the political crisis simmering at home and a weakening external environment are expected to be on display when second-quarter growth figures are published Wednesday.

Gross domestic product growth is forecast by economists surveyed by Bloomberg to have slowed from the previous quarter, to 0.9%, while picking up on a year-ago basis to 1.5%.

With the neighboring Chinese economy slowing and global demand stuttering, Hong Kong's trade-dependent economy was facing a full-year deceleration even before protests over the government's extradition bill began to disrupt business and tourism in June.

There is “no room for optimism for the second quarter and the entire year,” according to a statement from Hong Kong's government late Tuesday that cited Chief Executive Carrie Lam's remarks at a lunch for representatives of international and local chambers of commerce.

Lam said the territory's economic momentum has weakened in recent months on the U.S.-China trade war and other “uncertainties,” while pledging to “spare no efforts” to deal with anti-government protests that risk harming the city's growth.

“Mrs. Lam also said that the disputes in society in recent months are not conducive to Hong Kong's continued development and that she would spare no efforts to deal with them,” according to the statement. “She pointed out that everyone should continue to have confidence in the city and she firmly believes that with the concerted efforts of various sectors, Hong Kong would find opportunities amid difficulties.”

The GDP data is due for release at 4:30 p.m. in Hong Kong, with the year-on-year figures likely to be affected by the comparison with the weak performance in the second quarter of 2018. Figures on Thursday may indicate retail sales dropped year-on-year for a fifth month in June, with demonstrations and the subsequent police crackdown deterring shopping and tourism.

What Bloomberg's Economists Say...

“Carrie Lam says there is ‘no room for optimism' on 2019 growth. We agree. Four important growth drivers for the former colony are exports, tourism, finance and property. On each of them, the signs are discouraging.”
--Tom Orlik, chief economist. See his full HONG KONG INSIGHT

• For more insight from Bloomberg Economics, click here

International companies are also feeling increasingly pessimistic about the city's prospects, according to a survey of AmCham Hong Kong members.

“AmCham urges the government to stem any further damage and show clear leadership in meeting the expectations of Hong Kong people and in restoring the city's international reputation for effective governance under the ‘one country, two systems' framework,” AmCham President Tara Joseph said in a press release.

Small businesses in the city have also become much more pessimistic, with a sentiment index of small and medium companies dropping to the lowest in the seven years the survey has been conducted. The attitude of companies toward investment, sales, and profits all declined, as did all nine industry sub-indices, according to the results of the survey by Standard Chartered Plc.

To contact the reporters on this story: Scott Lanman in Washington at slanman@bloomberg.net;James Mayger in Beijing at jmayger@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net;Malcolm Scott at mscott23@bloomberg.net

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