How escalating trade tensions are undermining export growth prospects

HONG KONG - A mid-year export review by the Hong Kong Trade Development Council shows that escalating trade tensions are undermining growth prospects. "Escalating trade tensions and heightened geo-political uncertainties have severely decelerated Hong Kong's export growth momentum, increasing the urgency for local businesses to further diversify their operations and open up new markets," the report says.

"Exporters become more pessimistic across all the major sectors and markets," the report says.

"In view of the threat of prolonged trade disruption and slowing growth in the major economies, HKTDC Research has revised its 2019 export growth forecast downward from the original 5% to 2%, with risk on the downside."

The report says the global economy, beset with considerable uncertainties and trade disruption, has witnessed a slowdown in 2019.

"Growth of private consumption and business investment in developed economies has eased. "Weighed down by softened demand in most major economies, escalating trade tensions and various external headwinds, Hong Kong's GDP growth sank to a 39-quarter low of 0.6% in the first quarter of 2019, down from 1.2% in the previous quarter and 3% in 2018.

"In the US, although economic growth has rebounded to 3.1% in the first quarter of 2019, the slowdown in private consumption and domestic investment may dampen import demand in the near term.

"In the case of the EU, economic growth eased to 1.6% in the first-quarter of 2019 and will remain cautioned by Brexit and other uncertainties.

"After registering a 0.8% growth in first-quarter 2019, Japan is expected to remain on a slow growth path, amid a slowdown in external demand and the threat of a consumption tax hike scheduled for October 2019.

"While tax cuts and monetary easing may support domestic demand and maintain China's economic growth at the current 6.4% level, strong headwinds in exports and foreign investment remain a concern.

"Relatively speaking, the growth of other developing economies in Asia remains positive, underpinned by strong regional integration and solid domestic demand."

www.hktdcresearch.com (ATI).