Connect with us

Economy

Hong Kong plans $15 billion spending to support its economy amid coronavirus outbreak – CNBC

Published

on


A woman wearing protective mask in Hong Kong.

Anthony Kwan l Getty Images

The Hong Kong government has announced 120 billion Hong Kong dollars ($15.4 billion) worth of measures to support its economy, which has been dragged down by pro-democracy protests and the new coronavirus outbreak.

That planned spending would result in “an all-time high” fiscal deficit of 139.1 billion Hong Kong dollars, or around 4.8% of gross domestic product, Hong Kong’s Financial Secretary Paul Chan said in his budget speech on Wednesday.

“Since January 2020, Hong Kong has come under the threat posed by the novel coronavirus outbreak, which further dealt a blow to the economy. We must take decisive measures to tackle the situation,” he said, according to an official translation of his Cantonese speech.

Chan outlined measures to help businesses, workers and households weather additional economic challenges posed by the virus outbreak. They include:

  • Low-interest loans for small- and medium-sized enterprises, with government guarantee
  • A reduction in profits tax by 100%, subject to a ceiling to $20,000
  • Cash payout of 10,000 Hong Kong dollars to permanent residents age 18 and above

But the financial secretary warned that “one-off relief measures” may have to be “progressively reduced” in the coming years as the government’s expenditure is growing larger.

The planned deficit for the coming financial year starting in April is much larger than the $37.8 billion fiscal shortfall expected in the current financial year — the Hong Kong government’s first deficit in 15 years.

“The deficits are mainly caused by the fact that government revenue cannot keep up with drastic increases in government expenditure, especially recurrent expenditure,” said the financial secretary.

He explained that Hong Kong’s fiscal reserves of about 1 trillion Hong Kong dollars have allowed the government “to roll out special measures amid the prevailing economic downturn, such as paying out cash.” But over the longer term, the government must grow the economy and find new sources of revenue, he added.

Hong Kong in recession

The Hong Kong economy entered its first recession in a decade when it posted a 2.8% year-on-year decline in third-quarter gross domestic product. In the fourth quarter, the city’s GDP fell by 2.9%.

For the whole of 2019, Hong Kong’s economy contracted by 1.2% — the first annual GDP decline since 2009, said Chan.

Consumer and tourism spending have been weak spots in the Hong Kong economy. Some analysts said measures from the budget — particularly the 10,000 Hong Kong dollars cash payout — may not help the retail and tourism sectors much.

Janet Pau, director at The Economist Corporate Network, said the cash handouts could spur additional spending by Hong Kong residents. But that may not replace the loss of consumption due to a decline in mainland Chinese tourist arrivals, she told CNBC’s “Street Signs Asia.”

“Mainland tourist arrivals have been decimated by months and months of social unrest, and we will have to see if there’s going to be a pick up after this kind of twin crises,” said Pau, referring to the double threats that the Hong Kong is facing: anti-government protests and the coronavirus outbreak.

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

Australia central bank sees glimmer of hope as economy restarts after pandemic shutdown – The Guardian

Published

on


By Swati Pandey

SYDNEY (Reuters) – Australia’s central bank held rates at all-time lows on Tuesday and sounded less gloomy as the economy gradually re-opens during what is likely to be the worst quarter since the Great Depression.

The Reserve Bank of Australia (RBA) left rates at 0.25% at its monthly policy meeting in a widely expected decision, and said the “accommodative approach will be maintained as long as it is required.”

In a short post-meeting statement Governor Philip Lowe said the RBA was prepared to scale up government bond purchases if needed to ensure three-year yields held around 25 basis points.

Australia’s A$2 trillion ($1.4 trillion) economy is experiencing its biggest contraction since the 1930s in the current quarter but “it is possible that the depth of the downturn will be less than earlier expected,” Lowe added.

A significant decline in new infections, earlier-than-expected easing of restrictions and signs that hours worked stabilised in early May auger well for a recovery.

“There has also been a pick-up in some forms of consumer spending,” Lowe added.

States and territories across Australia have been easing social distancing regulations at differing paces in recent weeks, slowly ending a partial lockdown ordered in March, having largely contained the COVID-19 pandemic.

Australia, which has about 7,200 coronavirus cases, has not reported a death from the disease for more than a week.

The country’s success in containing the virus has sent the Aussie dollar soaring to five-month highs. Yet, that is leaning against monetary stimulus and won’t be welcome by the RBA.

The central bank made no mention of the exchange rate in the statement.

Highlighting the depth of the pandemic-driven global economic downturn and the fallout on Australia, many economists expect interest rates to remain at record lows for at least two more years.

Some are even predicting negative interest rates, though Lowe has ruled it out.

“While we have also become more optimistic about the outlook for the economy in recent weeks, we still expect the unemployment rate to jump to nearly 9% by Q3,” said Capital Economics analyst Marcel Thieliant.

He expects the central bank to announce an expansion of its government bond buying programme at its August policy meeting.

“And we only expect the unemployment rate to fall below 7% by 2022. That would leave it far above the RBA’s estimate of the natural rate of 4.5%, underlining that the RBA will miss its full employment mandate for years to come.”

Q1 GDP MAY DODGE CONTRACTION

Official data out earlier showed Australia boasted a record current account surplus last quarter as firm export prices and a fall in imports provided a timely boost to growth.

Other data out on Tuesday showed government spending also added to growth in the March quarter, while companies reported better sales and profits than many expected.

The figures led analysts to upgrade their forecast for first-quarter gross domestic product due Wednesday with some saying the economy might not have shrunk in the quarter as previously feared.

GDP had been forecast to show output contracted 0.3%, the first fall since early 2011.

“A small positive print cannot be ruled out,” said Su-Lin Ong, chief economist at RBC Capital Markets.

“But the likely collapse in activity in the current quarter and accompanying impact on the labour market…is a sharp and deep shock through the whole economy with likely lasting ramifications.”

(Reporting by Swati Pandey; Editing by Shri Navaratnam)

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

Saskatchewan's economy was already shrinking before COVID – Regina Leader-Post

Published

on


Article content

New data from Statistics Canada suggests Saskatchewan was already in a “mild recession” last year, even before COVID-19 and the latest oil shock began pummelling the province.

Saskatchewan’s gross domestic product (GDP), a measure of total economic output, shrunk from $82.2 billion in 2018 to $81.5 billion 2019 after factoring in inflation. That’s a decrease of 0.8 per cent, the worst number of all the provinces. The only other province to see its economy shrink last year was Alberta, which faced a contraction of 0.6 per cent.

Joel Bruneau, head of the economics department at the University of Saskatchewan, said the new data shows the province wasn’t even managing to tread water before COVID hit.

“We’ve averaged negative growth over four quarters, so I would call it a mild recession,” he said.

The data shows that most of the hit to Saskatchewan in 2019 came from goods-producing industries, rather than the service sector. Industrial production was down, as was mining and quarrying, while the energy sector was basically flat.

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

Lockdown or no lockdown, study shows COVID-19's economic destruction followed a similar path either way – National Post

Published

on


A group of economists studying how South Korea fought the COVID-19 outbreak without stay-at-home orders found that the country still experienced significant job losses in a pattern similar to that of countries that imposed lockdowns.

The study, from economists at Seoul’s Myongji University, Queen Mary University of London and St. Louis’s Washington University, also suggests that Canada’s slowly reopening economy may not go back entirely to normal as long as the virus is still prevalent.

“At most, half the job losses in the United States and the United Kingdom can be attributed to lockdowns,” the economists argue. Most job losses came from reduced hiring by businesses and a significant amount of non-participation in the labour market, rather than unemployment.

The same types of workers are feeling the effects, whether their country implemented a lockdown or not, the study claims. Less-educated workers, young people, workers in low-wage occupations and the self-employed lost were hardest hit, even when researchers controlled for industry effects that might over-represent these people.

“Lifting of lockdowns may lead to only modest recoveries in employment absent larger reductions in COVID-19 rates,” the paper warns.

The economists looked at labour-market effects in South Korea, where no lockdown was imposed, and compared the economic impact across different areas. One particularly bad local outbreak allowed the researchers to estimate that one additional infection for every thousand people causes a two to three per cent drop in local employment.

“The best way to revive the labour market is to eradicate the virus,” reads the paper by economists Sangmin Aum from the Myongji University in Seoul, Sang Yon Lee from Queen Mary University of London and Yongseok Shin from Washington University in St. Louis.

The study manages to untangle the many different factors in unemployment by concentrating on a localized outbreak in South Korea caused by a notorious event that spiked the transmission rate in the country.

In mid-February, the country had only 30 infections, but “Patient 31” attended a religious gathering in the city of Daegu. Ten days later, the country had more than 3,000 infections almost entirely clustered around Daegu. More than 60 per cent of them were traced back to that single gathering.

South Korea managed to quash the outbreak and maintains one of the lowest death rates in the world, mainly due to widespread testing, a robust contact-tracing regime and comparatively intrusive tracking measures, including monitoring quarantine-breakers with electronic wristbands.


People wearing masks walk at Myeongdong shopping district amid social distancing measures to avoid the spread of COVID-19, in Seoul, South Korea.

Kim Hong-Ji/Reuters

The study is a working paper released for discussion by the National Bureau of Economic Research in the United States before peer review. Although working papers haven’t gone through the rigorous publication process, they are a timely way to compare the results of the COVID-19 outbreak around the world.

Countries that didn’t implement a lockdown have also suffered economic damage from the pandemic due to the disruptions in global travel and trade.

Sweden, which kept most schools, businesses and restaurants open after experiencing its own COVID-19 outbreak, is still expecting its economy to contract by seven per cent this year. Sweden’s exports depend heavily on demand from other countries, many of which went into full lockdowns.

• Email: sxthomson@postmedia.com | Twitter:

Let’s block ads! (Why?)



Source link

Continue Reading

Trending