Print

Mail

wiki links

Hong Kong rating may suffer from lingering disease

Hong Kong's credit ratings may be cut if a killer disease drags on, damping economic growth and derailing government efforts to plug the city's budget deficit, Moody's Investors Service said.

The ratings "are likely to remain where they are at present unless this goes on for a very long time and affects the government's financial position in a very major way," said Steven Hess, a senior analyst with Moody's in New York.

Moody's has a stable outlook for Hong Kong's Aa3 local-currency debt rating and a positive outlook for its A3 foreign currency rating. The city's government is debt-free and had reserves of HK$305 billion (US$39 billion) at the end of February.

The disease, known as severe acute respiratory syndrome or SARS, has infected 708 people in Hong Kong, killing 16. Sales at shops and restaurants have dropped by as much as half as citizens shun crowds and tourists stay away for fear of catching the virus in the world's most densely populated city.

Lower spending may crimp tax revenue, widening a budget deficit the government forecast would be a record HK$70 billion for the year ended March 31, equal to 5.5 percent of GDP. As the deficit widens, the Hong Kong dollar's peg to the US dollar may be tested.

The 12-month Hong Kong dollar forward contract weakened to as much as 240, its weakest in at least five months, indicating the currency will be at 7.823 versus the US dollar in a year.
This story has been viewed 1586 times.