New World Development Company Limited
34
Execu t i ve V i ce - Cha i rman ’s Repo r t
Outlook
During the year under review, the international state of
affairs experienced rapid changes and the world situation
was undergoing a process of reshaping. Geopolitical
conflicts, economic fluctuations and turmoil in political and
economic alliances have brought uncertainties to the
development prospects of the world as a whole.
In April 2016, the International Monetary Fund (“IMF”)
published its world economic outlook named “Too Slow for
Too Long”, indicating that economic recovery had been slow
and increasingly fragile, despite the continuation of such
recovery. The global asset market became more fluctuating;
developed economies showed diminished growth momentum;
and emerging economies and low-income countries continued
to face suppressed growth.
Among developed economies, the United States had more
stable economic performance, with signs of recovery being
observed in economic indicators including consumer
expenditure, new residential construction and property
prices, new orders etc. Whilst the rebound of consumer
expenditure in the United States represents, according to the
Federal Reserve Chair Janet Yellen, positive forces supporting
employment growth in the coming months, the uncertainty
surrounding the outlook for the economy in general, the
constrained economic growth under weak investments and
the low growth of productivity in recent years are all hurdles
to the pace of economic recovery. It is expected by the
market that the Federal Reserve will remain very prudent in
its decision of interest rate rise in future.
In Europe, the “Leave” camp clinched victory in the Brexit
r e f e r e ndum h e l d on 2 3 J un e 2 0 1 6 . T h e f o r t h c om i n g
withdrawal of the United Kingdom (“UK”) from the European
Un i on ( “ EU ” ) ha s a l r e ad y r i pp l ed a s e r i e s o f ma r k e t
fluctuations and speculations for future developments,
including a plunge in the pound sterling, renegotiation of
trade deals, regulatory regime and migration issues between
the UK and the EU causing delay in corporate investments,
and also embroiling the sovereign credit rating of the UK. In
fact, the IMF previously pointed out the risks of economic
uncertainties to be faced by the UK, the fifth largest economy
in the world, upon its withdrawal from the EU, and estimated
a reduction in its economic output.
In Asia, the G7 Summit was held in Japan among leaders of
industrial nations in May 2016. Despite the lack of consensus
on market rescue issues, member states agreed to launch
fiscal stimulus packages of larger scale in view of the
increasing bluntness of monetary policies, according to the
declaration made after the meeting. This was followed by
the announcement made by Shinzo Abe, the prime minister
of Japan, to delay sales tax hike and the proposal of
expansionary fiscal stimulus plans to be implemented in
autumn 2016. It is generally considered that Japan must
make greater efforts in economic stimulation to escape from
decades of on-and-off deflation.
In China, which is the second largest economy in the world,
economic growth was in line with market expectation in
general. It has been projected by the central government of
China that the nation’s economy will undergo structural
reforms, transforming from a stage of high-pace growth in
the past to a new norm with progress while maintaining
stability. At present, China is in a stage of “rebalancing” of
its economy, shifting from an export-driven growth model to
one which is centered at household consumption. The
moderate monetary and fiscal policies introduced in 2015
have set off some of the unfavourable factors hindering
economic growth.
According to the latest “World Economic Outlook Update”
published by the IMF in July 2016, China’s economic growth
in 2016 and 2017 is estimated at 6.6% and 6.2% respectively,
up 0.3 and 0.2 percentage points respectively from previous
estimation in January 2016. It is generally considered that
China’s economic transformation which supports more
stable and sustainable growth will, in the long run, benefit
its neighbours in Asia.
As an open economy, Hong Kong faced multiple challenges in
the first half of 2016, including the adversity posed by the
g l o b a l e c o n o m i c c o n d i t i o n s , c o n t i n u a l e c o n o m i c
transformation in Mainland China and change of pace of
development in some local segments, which suppressed the
economic performance of the territory. Hong Kong’s economic
growth slowed down to 0.8% year-on-year in the first quarter
of 2016, or a drop of 0.4% on a quarter-to-quarter basis. The
seasonally-adjusted unemployment rate rose by 0.1 percentage
point to 3.4% in the first quarter of 2016, which stayed flat in
the period from February to April.
Fortunately, benefited from the implementation of stimulus
measures in different countries, the external economy
steadied and signs of improvement of Hong Kong’s economy
were observed. In April 2016, both the rate of decline of
exports value and the rate of decline of visitor arrivals
narrowed, and the year-on-year drop in retail sales in the
same period also improved marginally. HKSAR Financial
Secretary John Tsang states that the Hong Kong economic
growth forecast for 2016 remains at 1% to 2%.
