Fears of drastic slowdown in markets may be unfounded amid recovery
Fears of a drastic economic slowdown in Hong Kong in the second half of this year may be unfounded but sustained record-high oil prices and further interest rate rises will dampen recovery efforts, the University of Hong Kong has warned.
'Despite surging oil prices and tightening of monetary conditions, the expected slowdown in global economic growth has turned out to be mild,' said Richard Wong Yue-chim, director of the university's Apec Study Centre, in its latest quarterly forecast.
Alan Siu Kai-fat, the centre's executive director, stressed that global oil prices were likely to remain high and would knock between 1.5 and 2 percentage points from Hong Kong's real gross domestic product next year if they reached US$80 a barrel and stayed there for at least six months.
'This may be an unlikely scenario but Hong Kong should still be concerned,' he said.
The city will also experience the brunt of higher fuel costs if the US continues to combat inflationary pressure with more interest rate increases.
Mr Siu said if Hong Kong followed further jumps in US rates totalling 125 basis points over the next year, local property prices would fall by 6 to 10 per cent.
