HK heading for prolonged recession, says Tung

Tung said recently that official figures due to be released next week would show Hong Kong has suffered a second successive quarter of declining output – the official definition of a recession.

Tung said, “We are really having a difficult time. Our second quarter gross domestic product (GDP) growth figure will come out next week and it will be negative. The third quarter and the fourth quarter will be very difficult and the difficulties will go well into next year, into 1999.”

While maintaining Hong Kong will continue to have a free market economy, Tung said the Hong Kong special administrative region (SAR) government was prepared to continue to intervene in the stock market and currency markets to ward offspeculators.

“We are not there to support the stock market at any level. Neither are we against people taking short positions on the stock market,” Tung said defending the government’s intervention in the market.

The Hong Kong economy shrank 2.8 per cent in the first quarter of 1998 – its first contraction since 1985.

Unemployment in Hong Kong has risen to a 15 year high and Tung believes there is worse to come. “We have also seen unemployment going up and unfortunately it will continue to go up,” he said. Hong Kong’s property market has also crashed in recent months, with values plummeting by 40 per cent since last year.

Tung also urged Japan to speed up its efforts to reform its economy.

“We all hope Japan will get on with it and we are all very impatient. But it is very important to give (Keizo) Obuchi time to get things going,” he said, referring to Japan’s new prime minister and his promised economic stimulus plan to revive the sagging Japanese economy.