Hong Kong’s economic growth remained sluggish in Q2 at 0.6% year-on-year.
While consumption expanded by 4% year-on-year, it was slower than Q1’s 4.5%.
Growth in investment went down future to -12.1% year-on-year from -7% in Q1.
ING expects GDP in the second half of 2019 continues to be weak, said Iris Pang, the bank's economist for Great China.
The good news is that the base effect will give a boost to the year-on-year growth rate, she added.
"With the base effect, Hong Kong GDP could grow around 1.4%YoY in 2H19,” Pang noted. “This is a revision from our previous forecasts of 2.0%YoY and 2.5%YoY in 3Q and 4Q, respectively.”
ING has also revised Hong Kong’s full year GDP growth to 1.0% from 1.8%.
Two factors to look for the rest of the year include the development of the US-China trade war and the frequency, duration and combative nature of the protests which could well carry on through the summer, according to Pang.
Progress on the trade war, which will affect the import-export business between China and Hong Kong.
“Unless these factors fade, the Hong Kong economy will be weaker in the second half of the year,” Pang predicted.
While the total import and export volumes fell by 7.6% in 2018 as a result of the US-China trade tensions, Pang expected freight volumes to be lower in 2019.
The number of companies the industry has dropped by 1.5% year-on-year and by about 1% quarter-to-quarter, reflecting the issue of negative investment.
This fall in the number of firms also means fewer people are working in the export-import trade industry, whose employment is 17% of the total employed population in Hong Kong, Pang said.
Employment in the sector fell by 3.6% year-on-year in March and was down by 2.8% quarter-to-quarter, she observed.
In addition, the number of job vacancies in the industry fell in March by 10.5% year-on-year and was down by 3.2% quarter-to-quarter, she added.
“As such, the impact of the US-China trade war on Hong Kong cannot be ignored,” Pang pointed out. "Trade-related industries' wage growth and job security will be at risk for the rest of the year.
While slower wage growth in the export-import trade sector is expected to contribute to the slowdown in retail sales which have already seen four months of contraction, the recent protests that shorten shops’ opening hours which could also impact their businesses, she said.
