Standard Chartered cuts Hong Kong's growth prospects through 2021 as US-China trade war puts the squeeze on city's economy

By Martin Choi / | July 23, 2019 2:45 PM SGT
Standard Chartered, one of Hong Kong's three currency-issuing banks, has lowered its economic growth forecast for the city through 2021 due to headwinds from a prolonged US-China trade war, the latest among several financial institutions to cut their outlook.
Hong Kong's gross domestic product (GDP) may grow 1.4 per cent in 2019, expand 2 per cent next year, and increase 2.3 per cent in 2021, the bank said. Earlier forecasts by the bank were 2.2 per cent growth in 2019, 2.6 per cent in 2020 and 3 per cent in 2021.
"The economic data released in the first half of the year [for Hong Kong] were worse than we expected," said Kelvin Lau, Standard Chartered's senior economist for Greater China.
"Whereas the US and China met at the G20 and agreed to resume trade negotiations ... it does not seem likely that they will come up with a trade deal soon," Lau said during a press conference in Hong Kong. "As long as existing punitive tariffs remain, Hong Kong as a re-export hub is likely to see fewer trade flows passing through."
The deteriorating outlook comes at a bad time for Hong Kong, as the city " heavily dependent on trade-related financial services and logistics " finds itself caught in the crossfire of the year-long trade war between the world's two largest economies. Economic growth had steadily declined since the second quarter of 2018 as trade tensions worsened, with output expanding by a mere 0.6 per cent in the first three months, the slowest quarterly growth in a decade.
The dim view is also weighing on public discontent in the city, which has spilled over into protest rallies of unprecedented scale, as thousands of people continued to vent their dissatisfaction in the streets more than a month after an estimated 1 million people marched to oppose a controversial extradition bill.
Standard Chartered wasn't alone in sounding the growth alarm. HSBC, the biggest of the currency issuers in Hong Kong, lowered its 2019 growth forecast earlier this month to 2.4 per cent, from 2.7 per cent. Next year's outlook was cut...