Global recovery to benefit Hong Kong's trade sector, economists say
The global economic recovery led by the United States and Europe will benefit Hong Kong’s import and export industry this year, spurring an expansion in the trade-oriented economy’s gross domestic product, economists say.
Deutsche Bank says that since total trade is 4.5 times Hong Kong’s GDP, the improving global trade outlook is a good sign for the city’s economic recovery.
“The high degree of the openness – the ratio of total exports and imports to GDP – of Hong Kong’s economy means that the GDP growth of Hong Kong will rise faster than that of its trade partners,” Lin Li, a strategist at Deutsche Bank, wrote in a report.
In the first 11 months of last year, Hong Kong’s total merchandise trade grew 4 per cent to US$416.6 billion after rising 2.9 per cent in 2012 and 11 per cent in 2011.
While the Hong Kong Trade Development Council (HKTDC) expects overall export growth to improve to 5.5 per cent this year from 4 per cent last year, it remains cautious.
“The global economy is not particularly strong,” said Dickson Ho, an economist at HKTDC. “Even though we expect a recovery this year, it doesn’t mean the economy will be a lot stronger than last year. That’s why we only put in a slightly higher number this year.”
Some other institutions are more optimistic. Hang Seng Bank estimates Hong Kong’s exports will grow 6 per cent this year and imports will grow 7 per cent.
Oxford Economics forecasts a 6.8 per cent growth rate for exports and 7.5 per cent for imports.
“We expect growth in the US and EU will more than offset the slowdown in the growth of Asian economies,” said Ryan Lam, a Hang Seng Bank economist.
However, he said domestically oriented activity has been the main driver for the recovery of developed countries’ economies.
“So our studies suggest that the sensitivity of Hong Kong exports to the growth of the US and Europe will be lower than in the past,” Lam said.
Although the slowdown in China’s economic growth starting in the third quarter of last year has affected trade with the mainland – Hong Kong’s biggest trade partner by far – the developing trading relationship with the Association of Southeast Asian Nations is helping to maintain the market’s confidence.
According to the HKTDC, Asean had grown to become Hong Kong’s second-largest trading partner in the first 10 months of last year, accounting for US$79 billion in total trade, US$10 billion more than that with Europe.
“It is likely that Asean will maintain its position as Hong Kong’s second-largest trade partner this year,” Ho said. “Because trade with Asean is growing a lot faster than trade with the EU.”
Ho said negotiations will start “very soon” between Hong Kong and Asean on a free-trade pact, which he believes will expand bilateral trade and further bolster the growth of Hong Kong’s import and export industry.
“Right now, we are excluded from the free-trade agreement [between the mainland and Asean]. Once we have a separate agreement with Asean, we will expect that, sooner or later, we will have the same treatment that is given by Asean to China,” he said.
Other economists, however, were less sanguine about the impact of such an accord.
“I think the impact of the free-trade agreement will be limited, because the negotiation will likely be a very lengthy process,” Lam said.
“This will be a year when developed countries start a good cycle, whereas Asean falls into a trough, particularly with regard to staple commodities,” said Li Yao, chief executive of the China-Asean Investment Co-operation Fund.