> HK in Recession, Officially
> - Hong Kong Voice of Democracy
>
> August 28, 1998
>
> Hong Kong recorded a historic -5% growth rate in the second quarter of
> 1998, according to the Financial Services Bureau. This is the second
> consecutive negative rate recorded by the SAR in this year. Just
> before the announcement of the growth rate, more than 100 staffers of
> GrandMart, a local chain store, were laid off. Economic condition of
> the SAR continues to deteriorate after the handover, with no sign of
> improvement in sight.
>
> In the press conference, Financial Secretary Donald Tsang was asked
> whether the negative growth rate will mean a higher budget deficit.
> Tsang admitted that deficit will grow as government revenues shrink.
> He, however, denied the deficit is a contravention of the Basic Law,
> which provides that the HKSAR should aim at a balanced budget.
>
> Trade unions and workers associations are worrying that the continued
> deterioration of the economic condition will lead to further increase
> in unemployment rate. They demand the government to increase
> government expenses in order to provide more opportunities. In the
> press conference, Tsang said he needs more time to think about the
> budget of next fiscal year. Analysts believe that while it is becoming
> more and more difficult to increase public sector expenses as the
> economy is contracting at an alarming rate, it is also unlikely that
> the SAR government will slash the expenses to balance the budget,
> because an even higher unemployment rate will generate a serious
> political impact which the government will find unbearable.
>
> Tsang also denied that his projection of 3.5% growth rate early this
> year was wide off the mark. The government economist, Tang Kwong-yiu,
> said the economic situation is extremely volatile and some marginal
> errors in prediction are likely. Tsang attributed the poor growth to
> the shrinking of liquidity in Asia as a whole after the 1997 financial
> turmoil. He would not predict when Hong Kong will turn around or
> promise any specific measures to deal with the economic problems.
>
> Analysts believe with the announcement of the poor economic growth
> rate, many employers will seize the occasion to slash the employees'
> salary and benefits. They fear the cut-back will engender a vicious
> cycle in which the cutback and rising unemployment rate will lead to
> further recession of the retail market as consumers are reluctant to
> spend.
>
> Meanwhile, the SAR government is it best to prop up the stock
> government. Hang Seng Index closed at 7829.94 on Friday with a massive
> turnover of HK$79 billion, the highest in the history of Hong Kong
> stock market. The government claimed that speculators have been trying
> to profit from shorting the local stocks and Hang Seng Index futures
> and dumping the Hong Kong dollar. Tsang said the prop up is justified
> because the speculators are vandalizing the Hong Kong economy. During
> the past 2 weeks, it is estimated that the government has spent around
> HK$100 billion, out of reserve funds, to buy local blue chips in order
> to support the stock market.
>
> Economic analysts in general agree the government has won the first
> round, but the war is likely to prolong to September.
>
> Copyright 1997 Hong Kong Voice of Democracy. All right reserved.