The coronavirus pandemic could send Hong Kong’s exports for the year tumbling far beyond the 2 per cent drop predicted earlier by the city’s trade promotion body, with its research director on Tuesday warning the decline could stretch into the low double digits.
The chief concern was a slackening of demand from countries and areas where the Covid-19 outbreak had taken hold, said Nicholas Kwan Ka-ming of the Hong Kong Trade Development Council, adding small and medium-sized traders were vulnerable to lay-offs and closings.
Kwan said risks were rising despite recent signs of supply chains returning to normal in mainland China, where authorities had ordered factories to remain shut across most provinces after the Lunar New Year holiday ended in early February in a bid to halt the spread of the virus. Operations were only now beginning to return to normal after containment efforts brought the spread of the disease under control.
Kwan said that following the spread of Covid-19 in Japan and South Korea, shortages in electronics components had constricted the supply of consumer electronics in the market and prompted multinational firms to diversify production to different countries.
“The biggest concern now is on the demand side which is seriously affected globally,” he said. “Covid-19 has not only disrupted production, but also distribution of goods.”
The council in December forecast Hong Kong exports could fall by 2 per cent for the year, following a 4.1 per cent drop last year as the trade war between the United States and China shook economic pillars. But Kwan warned the pain going forward could be significantly deeper.
It is possible Hong Kong exports will decline by a high single-digit or low double-digit this year
Nicholas Kwan, Trade Development Council
“It is possible Hong Kong exports will decline by a high single-digit or low double-digit this year,” he said, adding the council would review its earlier prediction after taking February trade figures into account.
The outlook of uncertainty is underlined by the results of a survey of 500 local exporters, released quarterly but carried out in mid-February that found most saying the outbreak had damaged business. They cited difficulties in delivering products and finding manpower following the Lunar New Year holiday, as well as contacting overseas buyers and suppliers, and sourcing raw materials.
Hong Kong exports slumped 22.7 per cent in January, year on year, due to seasonal effects arising from the holiday. That come on the back of the disappointing figures for 2019, with Hong Kong recording a trade deficit of HK$426.8 billion (US$55 billion).
Kwan noted the spread of Severe acute respiratory syndrome (Sars) around the world in 2003 pushed global exports down by between 13 per cent and 15 per cent. That outbreak, which originated in China but spread to 32 countries and regions – infected 8,437 people worldwide and killed 813.
The coronavirus pandemic has now hit more than 150 countries and areas, with more than with 180,000 cases worldwide and over 7,000 deaths. Governments have responded by shutting their borders to foreigners, sending the travel industry into a tailspin and tanking markets. The Organisation for Economic Cooperation and Development this month clipped its forecast for global growth from 3 per cent, made in November last year, to 2.4 per cent. Credit rating firm Moody’s Investors Service said rising infection rates would impede global sentiment, heightening volatility in asset prices and tightening financing conditions, which could snowball into a deeper economic contraction worldwide.
When asked about when the Covid-19 pandemic might subside, Kwan said it depended on joint efforts of government leaders.
“During Sars, global leaders or the Group of 20 were coordinating with each other to fight against the virus,” he said. “Before Covid-19, many governments were fighting with each other. In the past several days we have seen coordination efforts by the Group of Seven, which is an improvement. What we need is global unity.”
This article Coronavirus: hit to Hong Kong exports may far surpass 2 per cent prediction first appeared on South China Morning Post