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Silver lining on the Mother's Day

Over the weekend, many families have arranged gatherings and activities to express appreciation and love to their mothers. As the pandemic has been gradually brought under control after months of relentless efforts in fighting against the virus, some of the restriction measures were slightly relaxed few days ago, such as the maximum number of people allowed for group gathering under the prohibition, as well as the operation restrictions on several commercial premises. The timely relaxations allow more celebrative gatherings and help create a festive atmosphere on this special occasion.

For many shops and restaurants, they have seen the longing rebound in businesses over this weekend. Hong Kong's economy has been dealt a double blow by the series of violent acts and the COVID-19 pandemic in the past year, and the businesses of the retail, catering and consumption sectors have since been going downhill. Boosting the number of consumers and businesses is therefore particularly crucial now for many small and medium enterprises to survive. Mother's Day, Father's Day, and other traditional festivals are all critical to bring business opportunities to the retail and catering sectors. However, while our economy is able to earn some breathing space as the pandemic subsided, social incidents are bouncing back and posing threat to the economic recovery.

Our economy is under an unprecedented stress. Hong Kong's Q1 GDP this year has seen an 8.9% recession, which is the worst quarterly performance in record. The near future is still full of uncertainties. The three major driving forces of our economy, i.e. trade, investment and consumption, have been losing their momentum. The outlook for Q2 is still pessimistic. Among the three aspects, the part of trade depends more on the economy and demands of the US and Europe, which are still very weak due to the development of the pandemic. It is hence difficult for us to expect a strong recovery on our trade with these regions in Q2.

For the part of local economic activities, about 30% of the businesses of the retail & consumption sector and 20% of that of the catering sector came from visitors. Quick recovery is not expected. For local consumption, as the pandemic has been gradually brought under control, we are trying to strike a right balance between our efforts in fighting against the virus and stabilising the economy. Some of the anti-pandemic measures may become the norms of our daily life, at least before the discovery of any effective vaccine. As such, how to maintain a sufficient level of economic activities under the changed environment would be an important issue to tackle.

On the other hand, the problem of violent acts is still troubling Hong Kong. Over the past few weeks, protests and conflicts reappeared and some of them disrupted the operation of shops and malls. This is no doubt bad news to the already weak local economy, retail businesses, small shops and their employees.

For instance, the decrease in the value of total receipts of the restaurants sector (the value) has been accelerating over the past year, from less than 1% in April 2019, to 14% and 32% in Q4 2019 and Q1 this year respectively. In February this year, the value decreased to $5.8 billion, equivalent to only about 58% of that in the same month of last year. It is doubtful if the restaurants could meet their operation cost with this low level of income. At this critical window for economic recovery, if customers are scared off by further protests and conflicts, or shops and restaurants are forced to close, it would be devastating for many people's livelihoods.

Even with different views, we should always express them peacefully and not to hurt the interests of others. Disrupting or harassing shops and malls and different forms of vandalism are all illegal acts, which bring harms to the overall interests of the society, and pose negative impacts on workers, retail shops, restaurants and Hong Kong's economy.

The outlook for Hong Kong's Q2 economic performance is still gloomy. Nonetheless, if we could keep up our efforts in fighting against the virus to facilitate the gradual resumption in economic and commercial activities, things might get better in Q3. Subject to the approval of the Legislative Council, the relief initiatives proposed in the Budget will soon be launched, which include the $10,000 cash payout for eligible Hong Kong citizens. Together with the measures under the two rounds of Anti-epidemic Fund, all the relief measures totalling $290 billion will provide significant support to the economy. For Instance, the scale of the $10,000 cash payout scheme amounts to some $70 billion. Comparatively, the monthly average value of total retail sales and the monthly average value of total receipts of the restaurants sector of Q1 this year are $27.8 billion and $7.2 billion respectively. I am therefore quite confident that even citizens only spent a portion of the cash disbursement in local consumption, the cash payout scheme could still bring a certain extent of stimulus to the market.

May 10, 2020