Hong Kong May Recover by Mid-2010, Trade Body Says

By Sophie Leung

Sept. 3 (Bloomberg) -- Hong Kong’s exports and economy may “fully recover” by the middle of next year as global growth resumes, said Edward Leung, the chief economist at the government-backed Hong Kong Trade Development Council.

Shipments may rise “slightly” in the fourth quarter of this year, Leung said in an interview in the city yesterday.

Hong Kong climbed out of a yearlong recession in the second quarter as declines in exports and household consumption moderated. A faster economic expansion in South Korea than initially estimated and an unexpected acceleration in Australia’s growth were signs across the Asia-Pacific this week that the deepest global slump since World War II is easing.

The “‘worst of the financial crisis may be over,” Hong Kong Financial Secretary John Tsang said in a speech in the city today. He added that there is “still a long way to go” before the world returns to sustainable growth.

In Hong Kong, the economy is still contracting year-on- year, shrinking 3.8 percent in the second quarter after a 7.8 percent decline in the previous three months that was the biggest drop since the Asian financial crisis of 1997-98.

The government forecasts gross domestic product will shrink by between 3.5 percent and 4.5 percent this year.

‘Back on Track’

Hong Kong will benefit from improved demand as the global and U.S. economies get “back on track,” according to the trade council’s Leung. Exports may remain volatile in the “coming months,” he said.

The value of exports from Hong Kong, a trade hub for mainland China, slid 19.9 percent in July from a year earlier, the ninth straight monthly decline. The trade agency estimates overseas shipments will fall by between 10 percent and 12 percent for the full year.

World Bank President Robert Zoellick said yesterday that the chances of a “truly global recovery” had improved on China’s growth and signs of economies stabilizing around the world. U.S. Treasury Secretary Timothy Geithner said that it’s too early to remove stimulus policies as positive signs emerge in the U.S. and around the world.

“Hong Kong’s small, externally oriented economy has been hit hard over the past year,” Tsang said today. “However, there is now light at the end of the tunnel.”

The city’s fourth-quarter exports will improve on demand from global restocking, said Cliff Sun, chairman of the Federation of Hong Kong Industries, which has more than 2000 corporate members, mainly manufacturers.

Hong Kong’s shipments slumped 17.7 percent in the first seven months from a year earlier. A 23 percent decline in February was the steepest in 50 years.

To contact the reporter on this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net