Word: gdp
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...That doesn't bode well for global growth prospects. David Roche, president of Independent Strategy, an economic consultancy in London, notes that throughout most of this decade "the world economy has been used to using $4 to $5 of credit for every $1 of GDP growth." Even if this "profligate use of capital is halved," Roche argues, "it still means credit expansion of 10% to 15% is needed to achieve real growth of 2% to 3%." The problem: credit, far from expanding, is still contracting around the world - despite governments' efforts to salvage the financial system...
Just how far and how fast will the economy drop this quarter? There's lately been a race to the bottom among forecasters, with the economists at Goldman Sachs leading the way. Early in the week, they put out a report saying that -3.5% annualized GDP growth was their baseline forecast for the quarter, but they also went so far as to outline a "just awful" scenario of -6.0% and a "worst case" of -7.8%. Today they updated their baseline forecast...
...government has done what it can to try to boost growth. The Hong Kong Monetary Authority has sliced its benchmark interest rate to 1.5%, from 6% a year ago. But economists still expect next year to be worse. Goldman Sachs predicts GDP will grow only 2.2% in 2009. In the meantime, Hong Kong's glum populous can at least take comfort in the efforts of one of the city's more esoteric groups. In mid-November, several members collected in Causeway Bay, a popular shopping and restaurant district, to offer people "free" hugs. More such sessions are planned in coming...
...Hong Kong has good reason to be afraid. The economy is experiencing its worst slowdown since the SARS virus rampaged the city in 2003, stalling the economy for months on end. GDP shrank 0.5% in the third quarter - the second consecutive quarter-on-quarter contraction. That officially means Hong Kong is in a recession, and it doesn't look likely to end any time soon. The government lowered its forecast for 2008 growth from 4-5% to 3-3.5%. "The global financial turmoil has derailed the economic upturn that Hong Kong has enjoyed," government economist Helen Chan told reporters...
...downturn has hit hard and fast. Hong Kong, like much of the rest of Asia, has been booming for several years; between 2004 and 2007, GDP growth averaged more than 7%. The economy was propelled forward by closer ties to China after Hong Kong was handed back to Beijing by Great Britain in 1997. Millions of mainland tourists flooded the city and spent their newfound wealth in Hong Kong's famous luxury shops. A rush of Chinese companies looking to tap international capital markets turned to Hong Kong's stock exchange, solidifying the city's status as a world-class...