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A Bumpy Path to Recovery

Following the two “Happy Hong Kong” Gourmet Marketplaces on Hong Kong Island and in the New Territories, another Gourmet Marketplace was held at the Kwun Tong promenade in Kowloon for two consecutive days starting yesterday. It comprised over 60 booths, with a theme on Asian cuisine as well as wine and dine. There were also performances and game booths. We hope both adults and for children could have an enjoyable weekend.

More activities of “Happy Hong Kong” will be rolled out. Ocean Park’s “Chill All Night” event, also being launched yesterday, will take place on four consecutive Saturday nights. Hong Kong Bar Culture Festival will be held from 9 to 11 June in East Tsim Sha Tsui. A range of different agricultural and fisheries festivals are scheduled to be organised in the coming few months. During the summer holidays, Harbour Chill Carnival, a large-scale sea-land carnival, with Victoria Harbour as the grand stage, will be held for five weekends from 8 July.

Recently, many people told me that they were more willing to buy and spend with consumption vouchers. As one may have noticed, the second-instalment vouchers will be disbursed in mid-July (i.e. 16 July). Eligible persons who wish to use their existing stored value facility (SVF) to receive the voucher do not need to register or make any application. For those who wish to switch their SVF or are newly eligible, they can register online or in person at the temporary service centres from 5 June (i.e. tomorrow) to 27 June. For more information, please visit the Consumption Voucher Scheme website .

The Consumption Voucher Scheme and “Happy Hong Kong” campaign are part of the “combination punches” in this year’s Budget for consolidating Hong Kong’s economic recovery momentum, and they complement with and reinforce each other. The disbursement of consumption vouchers injects around $33 billion of purchasing power into the market, while the “Happy Hong Kong” campaign creates more occasions for spending through themed activities, and boosts people flow in order to foster a vibrant atmosphere that would encourage people to spend more to overcome the traditional low retail season in these two months.

In fact, supporting local consumption is one of our key strategies to stabilise the local economy in the short to medium term, especially in the first half of the year. After a strong rebound in local consumption in the first quarter of the year, the value of total retail sales, while its growth slowed slightly in April, increased further to nearly $35 billion, easing the pressure on our economy from the continued weakness in exports since last year. When compared with pre-pandemic levels, both retail sales value and restaurant receipts have already recovered to about 90% of the levels during the same period in 2018 and 2019. While visitor arrivals and airport capacity have, for the time being, only recovered to about 50% of their pre-pandemic levels, our transportation and handling capacity is expected to recover further as the aviation industry actively expands its workforce; and visitor arrivals are expected to gradually pick up.

In addition, improvements in employment and income levels have also helped to support local demand and stimulate economic growth. The latest unemployment rate (February to April) dropped to 3.0%, the lowest level since the third quarter of 2019. Residents’ income also increased in real terms after adjustment for inflation. The median monthly household income, which reflects the overall household income, rose by 2.1% in real terms in the first quarter of this year. With stable employment and income, the footing for the economy to go forward has become stronger.

As for the asset market, the performance has been more complicated. In the residential property market, both the number of transactions and flat prices rebounded along with the recovery of the local economy. The number of residential property transactions rose to a monthly average of around 4,600 in the first four months of the year, representing a significant increase of over 60% compared to the same period last year (i.e. at the peak of the fifth wave of the epidemic). The overall flat price and rental indices also increased by 5.8% and 1.5% respectively in the first four months of the year compared to end-December last year. We will continue to speed up and increase housing land supply on all fronts to respond to the public’s pressing need for a better living environment.

For the stock market, a series of factors have heightened market concerns on the Mainland and global economy as well as financial markets: the recent collapses or takeover of banks, one after another, in Europe and the United States (US); inflation and interest rates remaining high; the US Congress’ recent grapple with the debt ceiling issue; and persistent geopolitical interferences, with the US and western countries trying to push other economies to decouple from China through so-called “de-risking”. Hong Kong’s stock market has been weak in recent months, with the Hang Seng Index closing last Friday about 4% lower than that at the end of last year. The average daily trading volume in the first four months of the year was also 4% lower than that of last year.

Looking ahead to the second half of the year, while the local economy is recovering steadily, we still need to stay vigilant about the uncertainties and challenges in the external environment. The International Monetary Fund has projected that global economic growth would slow further to 2.8% this year. Weak external demand, coupled with ongoing political disruptions to the global supply chain, will continue to weigh on Hong Kong’s export performance. That the US has undermined the multilateral system and trade rules with the World Trade Organization at its core, together with its pursuit of unilateralism and protectionism, will further heighten geopolitical tensions. This will not be conducive to the steady recovery of the global economy.

We must continue to pay attention to external risks and uncertainties, adopt bottom-line and worst-case-scenario thinking, and take precautions against risks. We must properly coordinate development and security, and ensure that Hong Hong Kong’s economic development would be of high quality and sustainable.

June 4, 2023