HONG KONG, Dec. 20 (Xinhua) -- Hong Kong's economy moderates in the year 2011 amid the European crisis and weak U.S. economy. Thanks to the robust consumption and investment, it still enjoys around 5 percent growth for the whole year, higher than most of the developed economies.
Looking ahead, economists cut further their forecasts for Hong Kong's growth in 2012 as external demand may continue to wither. However, with the support from the central government, it is believed the region's economy is resilient enough to avoid recession.
2011: GROWTH SLOWING DOWN
Amid European debt crisis and slackened U.S. economy, Hong Kong's economy has performed reasonably well in the year 2011, mainly driven by solid consumption and a strong labor market.
The region's economy grew 7.5 percent, 5.3 percent and 4.3 percent in real terms respectively in the first, second and third quarter of the year over a year earlier. Toward the end of the year, the economy was forecast to grow 5 percent for 2011 as a whole, the lower boundary of the earlier range forecast of 5 percent to 6 percent.
The growth moderation was mainly caused by a sharp fall-off in exports in the second half of the year due to an increasingly austere global economic environment. Total exports of goods slackened in the third quarter with export to the U.S. and European markets further decreasing. The ensuing deceleration in regional production resulted in a notable fall-off in Hong Kong's raw material exports to Asia, thereby exacerbating further the weakness in overall export performance.
The local stock market underwent a sharp correction in the second half of the year as global economic sentiment was severely dented by the deepening eurozone debt crisis and mounting concern over the increasingly shaky global economic recovery. The local property market also turned quieter with declines in both residential flat prices and transaction volume in the same period.
Nevertheless, the domestic sector displayed remarkable resilience throughout the year, rendering a strong cushion to overall economic performance. Private consumption expenditure grew robustly, under the support of rising incomes and job growth.
According to figures released by the government, overall investment spending picked up to a double-digit growth at 10.2 percent in real terms in the third quarter, with strong machinery and equipment acquisition and infrastructure construction offsetting the slack in private construction activities.
2012: ECONOMY TO DROP FURTHER
For the coming year, the outlook is more uncertain and negative. But international, governmental and private organizations unanimously believe that Hong Kong's economy will slow down further driven largely by a weakening in external demand. As a highly open, international financial center, Hong Kong would be hit hard by a significant shock to external sector that would spill into both trade and financial channels.
"We expect a moderate slowdown in private consumption and investment growth, stable fiscal outlays from the government, but sharper downturn in net exports. Our base case is for Hong Kong's GDP growth to revert to slightly below trend," Hang Seng bank said in its December Hong Kong Economic Monitor, entitled "2012 Economic Outlook: Growth Concern Moves Back into Focus".
The bank, together with the International Monetary Fund (IMF) and CCB International, forecast the growth rate of Hong Kong will slow down to around 4 percent next year. Standard Chartered was more pessimistic, with an outlook of 2.9 percent growth.
According to the analysis by IMF, the predominant near term risk to the region's economy emanates from "the shockwaves associated with a renewed global slowdown, a hard landing in the Chinese mainland, or extreme volatility in international financial markets."
The organization argued that if Hong Kong is hit by such a significant external shock, the first line of defense should be to provide a significant fiscal stimulus in as rapid a manner as possible. Measures could include reductions in taxation, direct transfers to households, and fiscal support for smaller enterprises. Insofar as is possible, Hong Kong government should also aim to accelerate ongoing public sector infrastructure projects.
However, surveys conducted by professional economic bodies showed that most people agreed Hong Kong is robust enough to survive another global financial crisis if global economic situation deteriorates. In terms of overall sentiment, a satisfactory outlook for Hong Kong's business environment for 2012 was predicted by majority.
"While the outlook is bleak, our survey demonstrates that Hong Kong has a strong, resilient business community. We have survived four financial crises over the past 20 years and have always rebounded stronger than before," explained Lee, deputy president of CPA Australia greater China.
MAINLAND KEY TO HK DEVELOPMENT
Strong support from the central government to Hong Kong highlighted further cooperation between the region and its motherland in the year 2011. In order to support economic and social development in Hong Kong, Chinese Vice Premier Li Keqiang announced a package of 36 measures during his visit in August this year, taking mainland-Hong Kong economic and financial cooperation to a new high.
In December, the central government and the government of the Hong Kong Special Administrative Region singed the Supplement VIII to the Mainland and Hong Kong Closer Economic Partnership Agreement (CEPA). The new Supplement provides for a total of 32 services liberalization and trade and investment facilitation measures and strengthens cooperation in areas such as finance, tourism, innovation and technology.
All these measures were highly welcomed by the Hong Kong society. A survey conducted by professional accounting body CPA Australia in December showed that most respondents believed the measures announced by Vice Premier Li Keqiang to boost Hong Kong's role as a leading offshore trading hub of the RMB was one of the major drivers of economic growth in 2012, together with the strong domestic consumption in the mainland and persistent low interest rates.
Hong Kong Chief Executive Donald Tsang said during the signing ceremony of the eighth supplement to CEPA that cooperation between Hong Kong and the mainland is crucial to the region's prosperity in the coming year.
"Amid drastic external economic changes, Hong Kong's economy will be faced with a lot of challenges next year. Economic and trade cooperation between the two sides is of great significance in stabilizing confidence of Hong Kong's firms so as to tackle further economic up and down," Tsang said.