Hong Kong braces for a no growth scenario in 2012

Hong Kong’s economy grew 0.4% in the 1Q, the slowest pace since the global financial crisis began in 2008.

The spate of worrisome economic events worldwide is forcing Hong Kong to re-assess its economic growth prospects for the year.

Analysts believe the government might accept a no growth scenario for Hong Kong this year. The government’s current growth estimate ranges from 1% to 3%. Two quarters of no growth is the generally accepted definition for a recession.

Financial Secretary John Tsang says the government will make an assessment in August whether to adjust Hong Kong's economic forecast.

He said the International Monetary Fund lowering its economic growth forecast will have an impact on Hong Kong because the city is a small and externally-oriented economy.

“We rely a great deal on our traditional markets in Europe and America. Meanwhile, countries in Asia have also been slowing down, so we are now looking out, we keep that in mind. In August, I will make an assessment whether we need to adjust our forecast.”

Tsang urged people to make prudent decisions in buying property as the interest rate may be adjusted.

Hong Kong’s economy grew 0.4% in the first quarter year-on-year, the slowest pace since the global financial crisis began in 2008. The government is due to announce second-quarter growth on August 10.

Hong Kong’s residential housing prices have risen more than 80% since early 2009 due to record-low mortgage rates and a lack of new supply.

Tsang estimated in his February budget speech that the city’s growth fell in 2012, projecting a range of 1% to 3% for the entire year. GDP growth was 5% in 2011 after a 7% increase in 2010.