Omicron outburst in Hong Kong to affect an array of sectors in 2022

Hong Kong’s splintered supply chain has arrived at a breaking point, with businesses witnessing delays in deliveries

Omicron outburst in Hong Kong to affect an array of sectors in 2022

Omicron outburst in Hong Kong to affect an array of sectors in 2022

Hong Kong’s omicron outburst is resulting in a jinx to business enterprises.

Not only does new-fangled social distancing curbs crumple revenue for restaurants, but also the ban on flights they depend on to bring everything from Wagyu beef to Australian cherries into the financial centre is estimated to surge costs and enhance inflation in the country.

Hong Kong’s most connected airline – Cathay Pacific Airways Ltd., has annulled hundreds of flights. Cargo capacity could drop below 1/5th of the pre-pandemic levels. It is estimated that logistics costs may increase by 40% within the next three weeks. Importers suppose that the price of fruit will surge by 10%.

In a quest for a ‘Covid Zero’ strategy, Hong Kong has padlocked bars, cinemas, and gyms. Parallelly, Hong Kong’s splintered supply chain has arrived at a breaking point, with businesses witnessing delays in deliveries of staples like berries and yoghurt and premium cheese and seafood.

The hazard of an omicron-steered increase has startled Hong Kong, wherein the vaccination rate is amongst the least for developed economies. Despite officials finding merely dozens of cases in the community so far, they are tracing at least three distinct transmission chains.

Amidst fear of the omicron variant, the government has scrapped aircrew quarantine exceptions it was previously given, compelling Cathay to diminish cargo flights. Owing to a lack of manpower, the airline’s cargo volume will diminish to around 20% of its pre-pandemic numbers in January, down from 71% in November. Passenger flights were also expelled from 8 nations, inclusive of the United Kingdom, the US, and Australia, further plummeting cargo capacity.

Those two separate blows are facilitating a magnanimous shortage of freight space, stated the chairman of the Hong Kong Association of Freight Forwarding & Logistics, Gary Lau.

Businesses that are vastly dependent on imports are dealing with the burden of interruptions. Suppliers expect shortages of everything from lobsters to eggplants. Flowers from Europe for the fast-approaching Lunar New Year could also be in diminished supply, alongside fruits and vegetables imported from places like the Netherlands and the United Kingdom.

Hong Kong’s restaurant and retail sectors, which had just commenced to recuperate after months of previously imposed restrictions, may now blunder a peak expenditure window during the Chinese holiday season. Sales from both sectors accomplished HKD 326 billion (USD 41.81 billion) for the foremost three quarters of 2021 after Hong Kong relaxed its social distancing regulations. That figure was approximately 30% lower than the same period in 2018, the last year before a series of protests gripped Hong Kong, triggering further economic impairment.

Several businesses are enduring logistical nightmares. The Managing Director of On Kee Dry Seafood, Richard Poon, stated that orders for conch and canned abalone were trapped in Australia. His team now depended on air freight for over 30% of their supply, he stated, adding that the shop enhanced orders distributed by plane around November 2021 to prepare for the holidays.

Poon stated that the supply will now be even more sung fit as they were concerned about running out of some goods to sell to consumers.

Shipping expenditures will be even more varied after the constriction of flight policies owing to the high demand for air cargo, stated Elmond Cheung, the Vice President of supermarket chain operator City Super Group stated in an email. The firm has already been witnessing challenges with sea shipments, including higher costs and longer delivery times, he stated. These factors have resulted in retail rates maturing by double digits, he stated.

Hong Kong’s Goal of ‘Covid Zero’

Hong Kong’s stringent virus regulations are vastly resonating with those of mainland China, which still maintains zero infections as its aim, even whilst most of the world adjusts to living alongside the virus. Yet the city depends vastly on imported goods for subsistence in a manner that the magnanimous landmass of China does not, increasing apprehensions that a virus strategy that demands seclusion is unsustainable.

Travel restrictions will ultimately decipher a spike in retail rates, stated the Vice Honorary Secretary of the Hong Kong Chinese Importers’ and Exporters’ Association, Michael Li. Li estimated extended delivery times and a possible surge in transport costs of around 30%.

Consumers may witness fresh flower prices increase 20% to 30%, for example, as they are stereotypically flown to Hong Kong from Europe, Li stated. Prices may also surge in Japanese restaurants, which utilize premium seafood ingredients, as well as Chinese restaurants that deliver seafood feasts during festivals.

Lau, of the Hong Kong Association of Freight Forwarding & Logistics, stated that there were already indications that the air logistics chain was crumbling.

As long as the government doesn’t ease its pandemic control regulations, he believed that the situation wouldn’t be any different in the short term.

Shutting Down Primary Schools

Primary Schools and Kindergartens will shut down again, Chief Executive of Hong Kong – Carrie Lam, declared on 11th January 2022, whilst air passengers from high-risk nations are established to be banned from traversing via the Hong Kong International Airport, according to people familiar with the matter. Those setbacks to normality arrived on the heels of the city closing beaches, beauty parlours, bars, and dine-in restaurants after 6:00 PM last week.

Populaces are being lurched into a semi-lockdown over a comparatively small number of cases of the omicron variant, with authorities warning that hidden gathering could be possible. The city has confirmed approximately 920,000 people over the past two weeks and found just 42 positive cases, Lam stated.

Regulations in Schools

COVID19 infections amongst young children provoked the move, Liam stated on Tuesday, illustrating that in-person learning at primary schools and kindergartens will shut on Friday until after the Chinese New Year. Secondary schools are to remain open for in-person classes, she stated.

Hong Kong will also extend the availability of China’s Sinovac Biotech Company Limited vaccine to children betwixt the ages of 5 and 12, she added.

It is a very difficult decision to make, Lam stated, on closing some schools, as on one hand, the government wanted to protect children from infection. However, if they suspended classes, they knew that there would be disadvantages concerning their physical and mental development.

Flight Prohibitions

Airport officials have instructed carriers about the imminent strategy to ban passengers from the so-called Group A countries from transiting via Hong Kong International Airport, according to people acquainted with the matter, asking not to be recognised as the particulars aren’t yet public.

The deferment will commence on January 15th 2022 and run up until February 14th, despite the end date being subjected to review, one of the people familiar with the matter stated. Procedures for how the ban will function are still to be established, another person stated.

That blow to the city’s aviation sector arrives after authorities last week prohibited populaces from returning from 8 nations including the United Kingdom, the United States of America, and Canada.

Lam stated on Tuesday that her government was investigating Cathay Pacific Airways Limited’s faithfulness to pandemic regulations after the prevalent omicron community transmission was connected back to the airline’s staff. If the airline misused quarantine exemptions that would be considered serious non-conformity.

Economic Influence

Lam also declared more financing to underpin businesses hit by the latest round of social distancing regulations, with details to arrive on Friday. The city’s anti-epidemic financing has approximately HKD 4 billion (USD 0.51 billion) remaining, she stated.

Virus limitations are damaging an economy that only began rebounding in 2021 after 2 years of decline. Morgan Stanley and Bloomberg Economics have already impaired their growth predictions for 2022 to 2.5% and 2% respectively, quoting delays to the travel simmer with mainland China and disturbances to consumer expenditure ahead of the Chinese New Year holidays.

The government provided HKD 120 billion of financial underpinning in 2021’s budget to shoot consumption and relax unemployment rates, alongside approximately HKD 320 billion (USD 41.04 billion) in virus liberation last year, focusing on an HKD 10,000 (USD 1,282.50) cash donation to residents.

All that has caused a brain drain of talent from sectors like health care, education, and finance. Tenacious population outflows will witness residential properly worth in Hong Kong slip by approximately 5% in 2022, UBS Group AG stated on Monday. That bearish perspective was agreed by Citigroup Incorporation and Morgan Stanley, which estimated home prices to crash by as much as 10% and 2% respectively, after years of unswerving growth.

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