Hong Kong is facing growing risks of a technical recession and rising unemployment after retail sales and exports shrank, Financial Secretary John Tsang Chun-wah has warned.
Tsang wrote on his blog on Sunday that the city would not be able to escape the impact of the European debt crisis as recent figures showed signs of a slowdown.
“July’s retail sales figures are very worrying,” he said, referring to a 1.3 per cent growth that month, down from 8.5 per cent in June.
Internal consumption, he said, was the major driving force to support the city’s modest 0.7 per cent and 1.1 per cent growth in the first and second quarters as exports had largely lagged.
If retail sales continue to lag, the city’s economy “may record a negative growth again” in the third quarter following a 0.1 per cent contraction in the second quarter, Tsang said on his blog, which is in Chinese .
“It will be difficult for exports to return to growth in the short term,” he said. “The risk of a technical recession is increasing and unemployment will probably rise.”
Hong Kong’s economy contracted 0.1 per cent in the second quarter, reversing the 0.6 per cent quarter-on-quarter growth in the first three months of the year.
The contraction, attributed mainly to the worsening euro debt crisis and slower recovery in the United States, prompted the government to lower its forecast for Hong Kong’s economic growth this year to 1 per cent to 2 per cent, down from 1 per cent to 3 per cent.
Tsang did not give any forecast in the blog, written after he returned from the Asia-Pacific Economic Co-operation finance ministers’ meeting in Moscow.
He will attend an economic summit in Vladivostok next week.