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Pandemic and Politics Push Hong Kong’s Economy Into Record Slump – Bloomberg

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Hong Kong’s economy suffered its worst quarter on record, extending the first recession in a decade as the coronavirus pandemic battered a city already weakened by political unrest.

The economy contracted 8.9% in the first quarter from year-ago levels, according to the government. The decline surpasses the previous record of -8.3% in the third quarter of 1998 and a 7.8% contraction in the first quarter of 2009, the two worst readings in data back to 1974, according to the Census and Statistics Department Hong Kong.

Record Slump

Hong Kong’s first-quarter GDP contracts as virus compounds protest woes

Source:  Census and Statistics Department Hong Kong, Bloomberg survey

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The latest decline also marks the third straight quarterly contraction for Hong Kong, the longest such stretch since the aftermath of the global financial crisis in 2009. The economy started shrinking from the third quarter of last year amid violent street protests and a government crackdown, political factors that remain unresolved.

“Our economic situation is very challenging, we are deep into recession,” Financial Secretary Paul Chan said at a press conference after the data was released. “Globally the epidemic is yet to be put under complete control. That will affect our export, that will also affect international traveling and business investment. Going forward, the second quarter, we believe that even if there is improvement, the improvement will be gradual and small.”

A 10.2% drop in private consumption from a year earlier was a major driver for the contraction, according to the government report. Total exports of goods sank 9.7% in the period, while exports of services plummeted 37.8%. Government spending grew by 8.3% from a year ago.

Assuming the virus crisis improves, Hong Kong will come out of recession gradually toward the end of the year, Chan said. On Sunday, Chan warned of the worst full-year performance on record with a contraction of as much as 7%, after the economy shrank 1.2% last year.

“Economic activities are likely to stay subdued in the near term if the threat of the pandemic continues,” a government spokesman said in the release. “Hong Kong’s near-term economic outlook is subject to very high uncertainties, hinging crucially on the evolving global public health and economic situations.”

Developments in the U.S.-China relationship, geopolitical tensions and global financial market volatility also warrant continued attention, the spokesman said. Revised figures with a more detailed breakdown are due on May 15.

Easing Controls

“The Hong Kong economy can’t rely solely on fiscal stimulus to get back to normal,” said Iris Pang, greater China chief economist with ING Bank NV in Hong Kong. “Consumption will continue to be bad in the second quarter, though may not be worse than the first on a quarter-on-quarter basis. That’s due to an extra hit on consumption from violent protests and social distancing measures.”

Even as the city prepares to ease some social distancing measures amid a steady improvement in the local outbreak situation, the hit to global commerce and the threat of renewed anti-government unrest means activity is likely to remain depressed. Unemployment is rising with tourism, retail, transport and other industries decimated.

The extended downturn’s impact can be especially seen across the city’s struggling small and medium-sized businesses, which have borne the brunt of the impact from protests since last year and now the coronavirus.

“Hong Kong has been a risk-taking society relative to starting a business, but the situation going on the last year will create long memories in people’s minds,” said Todd Handcock, chairman of the Canadian Chamber of Commerce. “It’s been a very challenging year for SMEs in Hong Kong. The unfortunate reality is some of these will not survive and others will struggle for a very long time.”

Click here to read more about the government’s stimulus strategy

As of December, 340,000 SMEs accounted for more than 98% of all business units and employed some 1.3 million people, or about 45% of the total excluding civil servants, according to government data.

Sentiment among small businesses is sitting near a record low while those reporting a need for credit jumped to an almost four-year high of 8.8%, March government data show.

Small Bump

Hong Kong small and medium business sentiment rebounded slightly in March

Source: Hong Kong Census and Statistics Department

Note: Data show monthly diffusion index reading on business receipts for SMEs, calculated by adding the percentage of respondents reporting “up” compared with previous month and half those responding “same.” Survey size is about 600 SMEs drawn from a larger pool. Reading above 50 indicates generally favorable business conditions.

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“If we all fold, the unemployment levels are going to skyrocket in this city,” said Bella Dobie, co-founder and managing director of Hong Kong branding and marketing firm Orijen. The firm has six full-time staff including Dobie and has been in business since 2000. “The economy of Hong Kong has been struggling since the start of the protests and Covid-19 is just a double whammy.”

The government has taken steps to address the looming employment crisis through multiple rounds of stimulus spending, most prominently through an HK$80 billion wage subsidy program that is not expected to begin distribution until June.

Hong Kong Faces Delays Giving Cash Out as Virus Hits Economy

Those businesses that do survive will likely emerge with smaller, leaner operations, with lasting implications on the wider economy as jobs that once existed may not return. Total employment in the city shrank by a record 3.6% in March.

As of December, the number of job vacancies in the private sector of Hong Kong totaled about 54,000, down 30% from a year ago, according to government data. Vacancies in retail and accommodation and food services plummeted 44% and 65% respectively.

The threat of protests resuming once the virus fades and measures forbidding group gatherings ease could also further extend the pain for businesses and the economy.

“It’s about the huge uncertainty of the city’s future,” said Alicia Garcia Herrero, chief Asia Pacific economist with Natixis SA. “Anybody who lives here understands it, you don’t even know what is going to happen tomorrow.”

— With assistance by Alfred Liu

(Updates with comments from Paul Chan and an economist.)

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    ‘Disgraceful:’ N.S. Tory leader slams school’s request that military remove uniform

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    HALIFAX – Nova Scotia Premier Tim Houston says it’s “disgraceful and demeaning” that a Halifax-area school would request that service members not wear military uniforms to its Remembrance Day ceremony.

    Houston’s comments were part of a chorus of criticism levelled at the school — Sackville Heights Elementary — whose administration decided to back away from the plan after the outcry.

    A November newsletter from the school in Middle Sackville, N.S., invited Armed Forces members to attend its ceremony but asked that all attendees arrive in civilian attire to “maintain a welcoming environment for all.”

    Houston, who is currently running for re-election, accused the school’s leaders of “disgracing themselves while demeaning the people who protect our country” in a post on the social media platform X Thursday night.

    “If the people behind this decision had a shred of the courage that our veterans have, this cowardly and insulting idea would have been rejected immediately,” Houston’s post read. There were also several calls for resignations within the school’s administration attached to Houston’s post.

    In an email to families Thursday night, the school’s principal, Rachael Webster, apologized and welcomed military family members to attend “in the attire that makes them most comfortable.”

    “I recognize this request has caused harm and I am deeply sorry,” Webster’s email read, adding later that the school has the “utmost respect for what the uniform represents.”

    Webster said the initial request was out of concern for some students who come from countries experiencing conflict and who she said expressed discomfort with images of war, including military uniforms.

    Her email said any students who have concerns about seeing Armed Forces members in uniform can be accommodated in a way that makes them feel safe, but she provided no further details in the message.

    Webster did not immediately respond to a request for comment.

    At a news conference Friday, Houston said he’s glad the initial request was reversed but said he is still concerned.

    “I can’t actually fathom how a decision like that was made,” Houston told reporters Friday, adding that he grew up moving between military bases around the country while his father was in the Armed Forces.

    “My story of growing up in a military family is not unique in our province. The tradition of service is something so many of us share,” he said.

    “Saying ‘lest we forget’ is a solemn promise to the fallen. It’s our commitment to those that continue to serve and our commitment that we will pass on our respects to the next generation.”

    Liberal Leader Zach Churchill also said he’s happy with the school’s decision to allow uniformed Armed Forces members to attend the ceremony, but he said he didn’t think it was fair to question the intentions of those behind the original decision.

    “We need to have them (uniforms) on display at Remembrance Day,” he said. “Not only are we celebrating (veterans) … we’re also commemorating our dead who gave the greatest sacrifice for our country and for the freedoms we have.”

    NDP Leader Claudia Chender said that while Remembrance Day is an important occasion to honour veterans and current service members’ sacrifices, she said she hopes Houston wasn’t taking advantage of the decision to “play politics with this solemn occasion for his own political gain.”

    “I hope Tim Houston reached out to the principal of the school before making a public statement,” she said in a statement.

    This report by The Canadian Press was first published Nov. 8, 2024.

    The Canadian Press. All rights reserved.

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    Saskatchewan NDP’s Beck holds first caucus meeting after election, outlines plans

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    REGINA – Saskatchewan Opposition NDP Leader Carla Beck says she wants to prove to residents her party is the government in waiting as she heads into the incoming legislative session.

    Beck held her first caucus meeting with 27 members, nearly double than what she had before the Oct. 28 election but short of the 31 required to form a majority in the 61-seat legislature.

    She says her priorities will be health care and cost-of-living issues.

    Beck says people need affordability help right now and will press Premier Scott Moe’s Saskatchewan Party government to cut the gas tax and the provincial sales tax on children’s clothing and some grocery items.

    Beck’s NDP is Saskatchewan’s largest Opposition in nearly two decades after sweeping Regina and winning all but one seat in Saskatoon.

    The Saskatchewan Party won 34 seats, retaining its hold on all of the rural ridings and smaller cities.

    This report by The Canadian Press was first published Nov. 8, 2024.

    The Canadian Press. All rights reserved.

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    Nova Scotia election: Liberals say province’s immigration levels are too high

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    HALIFAX – Nova Scotia‘s growing population was the subject of debate on Day 12 of the provincial election campaign, with Liberal Leader Zach Churchill arguing immigration levels must be reduced until the province can provide enough housing and health-care services.

    Churchill said Thursday a plan by the incumbent Progressive Conservatives to double the province’s population to two million people by the year 2060 is unrealistic and unsustainable.

    “That’s a big leap and it’s making life harder for people who live here, (including ) young people looking for a place to live and seniors looking to downsize,” he told a news conference at his campaign headquarters in Halifax.

    Anticipating that his call for less immigration might provoke protests from the immigrant community, Churchill was careful to note that he is among the third generation of a family that moved to Nova Scotia from Lebanon.

    “I know the value of immigration, the importance of it to our province. We have been built on the backs of an immigrant population. But we just need to do it in a responsible way.”

    The Liberal leader said Tim Houston’s Tories, who are seeking a second term in office, have made a mistake by exceeding immigration targets set by the province’s Department of Labour and Immigration. Churchill said a Liberal government would abide by the department’s targets.

    In the most recent fiscal year, the government welcomed almost 12,000 immigrants through its nominee program, exceeding the department’s limit by more than 4,000, he said. The numbers aren’t huge, but the increase won’t help ease the province’s shortages in housing and doctors, and the increased strain on its infrastructure, including roads, schools and cellphone networks, Churchill said.

    “(The Immigration Department) has done the hard work on this,” he said. “They know where the labour gaps are, and they know what growth is sustainable.”

    In response, Houston said his commitment to double the population was a “stretch goal.” And he said the province had long struggled with a declining population before that trend was recently reversed.

    “The only immigration that can come into this province at this time is if they are a skilled trade worker or a health-care worker,” Houston said. “The population has grown by two per cent a year, actually quite similar growth to what we experienced under the Liberal government before us.”

    Still, Houston said he’s heard Nova Scotians’ concerns about population growth, and he then pivoted to criticize Prime Minister Justin Trudeau for trying to send 6,000 asylum seekers to Nova Scotia, an assertion the federal government has denied.

    Churchill said Houston’s claim about asylum seekers was shameful.

    “It’s smoke and mirrors,” the Liberal leader said. “He is overshooting his own department’s numbers for sustainable population growth and yet he is trying to blame this on asylum seekers … who aren’t even here.”

    In September, federal Immigration Minister Marc Miller said there is no plan to send any asylum seekers to the province without compensation or the consent of the premier. He said the 6,000 number was an “aspirational” figure based on models that reflect each province’s population.

    In Halifax, NDP Leader Claudia Chender said it’s clear Nova Scotia needs more doctors, nurses and skilled trades people.

    “Immigration has been and always will be a part of the Nova Scotia story, but we need to build as we grow,” Chender said. “This is why we have been pushing the Houston government to build more affordable housing.”

    Chender was in a Halifax cafe on Thursday when she promised her party would remove the province’s portion of the harmonized sales tax from all grocery, cellphone and internet bills if elected to govern on Nov. 26. The tax would also be removed from the sale and installation of heat pumps.

    “Our focus is on helping people to afford their lives,” Chender told reporters. “We know there are certain things that you can’t live without: food, internet and a phone …. So we know this will have the single biggest impact.”

    The party estimates the measure would save the average Nova Scotia family about $1,300 a year.

    “That’s a lot more than a one or two per cent HST cut,” Chender said, referring to the Progressive Conservative pledge to reduce the tax by one percentage point and the Liberal promise to trim it by two percentage points.

    Elsewhere on the campaign trail, Houston announced that a Progressive Conservative government would make parking free at all Nova Scotia hospitals and health-care centres. The promise was also made by the Liberals in their election platform released Monday.

    “Free parking may not seem like a big deal to some, but … the parking, especially for people working at the facilities, can add up to hundreds of dollars,” the premier told a news conference at his campaign headquarters in Halifax.

    This report by The Canadian Press was first published Nov. 7, 2024.

    — With files from Keith Doucette in Halifax

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