HONG KONG: As Hong Kong increasingly shows steady signs of economic recovery while the city's jobless rate decreases, major financial institutions are united in predicting that Hong Kong's economic growth will return to "positive territory" next year. However, they are divided as to how fast the city's GDP will expand.
"The economy is on track to return to growth. We see the economy expanding 1.6 percent in the final quarter, after contracting 4.6 percent in the first three quarters," Hang Seng's economists Irina Fan and Joanne Yim wrote in a report released yesterday.
The final quarter started on a positive note as unemployment trended down, retail sales growth accelerated and exports improved, Hang Seng Bank said.
However, the picture is not all rosy. While Hong Kong's gross domestic product is expected to rebound to positive growth in 2010 from a contraction this year, Hang Seng suggests the pace of expansion is likely to be tepid. The bank forecasts a 3.5 percent GDP growth for next year.
By contrast, Goldman Sachs upgraded its 2010 economic growth forecast on Hong Kong to 5.8 percent from 5 percent, saying loose financial conditions and structural catalysts will support above-trend growth of the city.
The US investment bank is also optimistic towards the city's job market.
"The unemployment rate will go below 5 percent in the coming months, and will roughly stand at 4 percent in 2011 if not lower," said Enoch Fung, a regional economist at Goldman Sachs.
A survey conducted this week by Manpower Professional, a recruitment consulting firm, has found that 17 percent of Hong Kong companies plans to take on new staff in the first three months of 2010, as the city's economy recovers strongly from the downturn.
The response, from interviews with more than 800 employers, was a 6 percentage point increase from a similar survey conducted three months ago when Hong Kong emerged from a year-long recession.
"This is the best set of results we have had for over a year; it is very positive," Ian Strutton, a director of Manpower Professional, said.
Hiring sentiment has returned to levels last seen before the credit crunch, he said, and much of the hiring expected in the first quarter of 2010 will be new hires rather than replacements.
Despite Hong Kong's improving economy, Goldman Sachs thinks Hong Kong interest rates will stay low, even if US interest rates begin to rise earlier than expected.
"Hong Kong's central bank will be slow in response; it might not immediately follow the US in lifting interest rates," Goldman's Fung said.
