Short War to Have Limited Impact on HK's Exports

The US-led war against Iraq would have only limited impact on Hong Kong's exports in 2003 if it is short-lived, according to Trade Development Council's (TDC) preliminary assessment released Thursday. TDC's Chief Economist Edward Leung said in a news conference, "Performance in the second quarter may be sluggish and would probably continue to be so in the third quarter of 2003. But if the world economy recovers towards the end of the year, Hong Kong's exports would perform better in the final quarter." "For the year as a whole, Hong Kong exports should post a modest growth of 4 percent, instead of 4.5 percent as predicted earlier," he said. The report said the world economic situation, affected in part by the US-Iraqi tension, has deteriorated since late 2002. The International Monetary Fund had trimmed its 2003 world economic forecast to 3.3 percent, down from its previous prediction of 3.7 percent, even before any strike on Iraq. Overseas buyers are also likely to hold back on their orders because of the Iraq situation. This would impinge on Hong Kong's short term export performance. But despite these unfavorable external factors, Hong Kong exports fared well in the first quarter of 2003. Hong Kong's exports in January this year soared 27 percent, duepartly to the small base for comparison and partly because of a rush to meet delivery deadlines. Although oil prices came down recently, they had been rising since mid-2003, pushing up costs of plastics raw materials and other petrochemical products, and cutting into exporters' profit margins, he said. Hong Kong exporters are likely to be hit again, if high oil prices prevail. Suppliers are reluctant to pass the higher cost onto their customers for fear of losing business. The report also warned that further tightening of the 24-hour cargo manifest rule imposed by the United States to deter terrorist attacks could disrupt trade flow. For electronics products, while the demand for security and emergency items will remain strong, the sales of telecom and household electrical appliances are likely to be dragged by the weak consumer sentiment, he said. The clothing industry is also in the doldrums with buyers being hesitant about placing orders, particularly urgent orders that require shipment by air which is costing more these days due to higher oil prices, he said. However, toy exports might be spared the full brunt of the economic downturn, as there are still some months before Christmas,and the economic situation might improve before then, he said. Watches and clocks exports to countries in the Middle East havetemporary been affected by the Iraq situation, but the overall impact on Hong Kong's exports of timepieces is not likely to be substantial, he said. Regarding jewelry, buyers are found to be taking longer than usual to make up their minds about placing their orders, and the delay would force manufacturers to shorten their production schedules, he said. Leung said, "In general, overseas consumers will continue to exercise great caution in the way they shop and will look harder for lower prices. Overseas importers and buyers will be more demanding this year, exacting price concessions and opting for products with more value-added features," he said.

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