SAR household debt hits new highBusiness | Kevin Xu 31 Mar 2020
A household debt crisis may be brewing in Hong Kong, as the local household debt has ballooned to 80.4 percent of GDP in the fourth quarter last year, rising 4.6 percentage points from the second quarter and hitting a new high, data from The Hong Kong Monetary Authority shows.
The city's de facto central bank also warned that the unemployment rate could rise even faster than during the 2003 SARS epidemic, as the impact of the coronavirus outbreak may be larger than that of SARS.
The unemployment rate increased from 7.4 percent in December 2002 to a high of 8.5 percent in June 2003 due to an abrupt fall-off in economic activity, the HKMA said.
Hong Kong's unemployment rate was 3.7 percent for the quarter ended last month, the highest in more than nine years.
The HKMA also added that no significant outflows from the Hong Kong dollar or Hong Kong's banking system were observed during the review period.
"Looking ahead, the Hong Kong banking sector will continue to be challenged by a number of downside risk factors arising from the uncertainties over the extent of the coronavirus outbreak, future US-China trade relations, geopolitical tensions and domestic social incidents," the HKMA said in a statement.
Major banks including The Hongkong and Shanghai Banking Corporation, BOC Hong Kong (2388) and Standard Chartered Bank (Hong Kong) are imposing special measures to comply with the social distancing guidelines, including offering body temperature checks to customers, and adopt queue ticketing systems to facilitate epidemic control and prevention.
Meanwhile, S&P Global Ratings said the rapid spread of Covid-19 will make Asia-Pacific credit conditions as tough as during the Asian Financial Crisis in 1997-1998.
The credit rating agency expects Asia-Pacific growth to dive to 2.2 percent in 2020, with a U-shaped recovery taking hold only later this year.
In other news, the Financial Services Development Council suggested extending the applicability of preferential tax rates, such as taxation at half-rate, to additional classes of general insurance business.