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Hong Kong's economy was hit by the Severe Acute Respiratory Syndrome (SARS), but not as badly as earlier expected, said an economist on Friday.
Hong Kong government economist K.Y. Tang said that overall economic activity in Hong Kong had begun to bottom out towards the end of May after SARS receded, and had been turning progressively better in June, July and August.
With the GDP outturn in the second quarter being not as low as earlier thought, and having regard to the current pace of upturn, the forecast growth rate in real terms of GDP for 2003 is revised to 2 percent, half of a percentage point up from the 1.5 percent growth forecast in the May update, according to Tang.
The spread of SARS in Hong Kong since mid-March had dealt a heavy blow to the economy, causing GDP in the second quarter of 2003 to slacken to a 0.5 percent decline in real terms over a year earlier, from a solid growth of 4.5 percent in the first quarter.
On a seasonally adjusted quarter-to-quarter comparison, GDP fell visibly, by 3.7 percent in real terms in the second quarter of 2003, following a 0.3 percent decline in the first quarter, according to the Half-yearly Economic Report 2003, released by the government on Friday.
The blow to inbound tourism and the travel-related sectors was most severe, particularly in April and May. Even with some relative improvement in June, exports of services for the second quarter of 2003 as a whole still plummeted by 14.7 percent in real terms over a year earlier, markedly down from the 12.6 percent increase in the first quarter. While offshore trade continued to grow apace, it rendered only a partial offset.
Local consumer spending likewise went distinctly lower in April, yet turned up steadily in May and June as the SARS threat receded. For the second quarter of 2003 as a whole, private consumption expenditure fell by 2.2 percent in real terms over a year earlier, only slightly down from the 2.0 percent decline in the first quarter. The setback was concentrated in residents' spending abroad, as local people avoided visits to the SARS-affected places.
Investment spending slackened considerably, to a 5.3 percent decline in real terms in the second quarter of 2003 over a year earlier, in contrast to a 3.5 percent increase in the first quarter. Building and construction output had an enlarged decline amidst a weak property market, while machinery and equipment intake also moderated markedly as business conditions faltered.
Yet total exports of goods were relatively unaffected by SARS, sustaining double-digit growth all through the second quarter. After a 19.1 percent surge in real terms in the first quarter of 2003 over a year earlier, there was a further leap by 14.3 percent in the second quarter. The robust external trade thus rendered a useful cushion to the economy against the setback in the domestic sector.
As the fuller impact of SARS on the labor market set in, the seasonally adjusted unemployment rate rose markedly, from 7.5 percent in the first quarter of 2003 to 8.6 percent in the second quarter (and further to a new high of 8.7 percent in the three months ending July). The underemployment rate likewise rose, from 2.9 percent to 4.3 percent between these two quarters (but edged down to 4.2 percent in the three months ending July).
(Xinhua News Agency August 29, 2003)
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