Hong Kong's economy could begin contracting as early as this quarter although much of the fallout from the global financial meltdown would not hit city until next year, economists warned yesterday.
'We see the possibility of negative growth in the fourth quarter of this year and the first quarter of next year, when Hong Kong will slide into a recession,' City University economics professor Stephen Cheung Yan-leung said. 'I'm not optimistic.'
He said small- and medium-sized enterprises would face difficulties amid a slumping economy, which may lead to layoffs.
Financial Secretary John Tsang Chun-wah said the troubles at garment manufacturer U-Right International Holdings, which had to sack nearly half its local workforce and shut 20 stores, were just the beginning of the financial 'tsunami'.
That sentiment was echoed by DBS Bank senior investment strategist Daniel Chan Po-ming, who warned the situation would get worse. 'We will face a slump in exports, as Hong Kong re-exports many goods to Europe and the US, as well as a shrinking financial market,' Mr Chan said.
In its latest economic review last week, Bank of China (Hong Kong) warned there would be no growth, or even an economic contraction, in the fourth quarter.
