Now, I would like to take the opportunity to respond to some concerns that under our Linked Exchange Rate system, the Hong Kong dollar will appreciate alongside the US dollar, thereby weakening the competitiveness of our economy, in particular the tourism industry, and dealing a blow to the wobbly retail and tourism sectors. I wish to point out that there is no evidence to suggest a direct linkage between the recent decline in visitor numbers and BIS central bankers’ speeches  3  expenditure, and the exchange rate of the Hong Kong dollar. The Nominal Effective Exchange Rate (NEER) of the Hong Kong dollar rose by 6.6% year-on-year in the third quarter this year, but price levels for tourism-related merchandise and services fell by a greater magnitude. For example, prices for jewellery, clocks and watches fell by 8.2%, while the average room rate for hotels fell by 15.3%, which more than offset the effects of a stronger Hong Kong dollar. This clearly shows that Hong Kong’s economy is sufficiently flexible to adjust speedily to changing markets. 19. In addition, Hong Kong is different to other EMEs. We have sound and robust monetary, banking and financial systems. In response to the large capital inflows over the past few years, we have got ourselves well-prepared by introducing seven rounds of countercyclical macroprudential measures on property mortgages to enhance the resilience of the Hong Kong banking system.
In this case, we can expect that in the third and fourth quarters economic activity will be recovering quarter-on-quarter. The economic situation will be returning to normal step-by-step. The direct adverse impact of the restrictions primarily falls on this quarter, while their secondary effects will continue to manifest in the future. According to our surveys, over 80% of the businesses across various industries have been experiencing the influence of the coronavirus pandemic and current 1/3  BIS central bankers' speeches  restrictions. Companies’ business sentiment has materially declined. It will take time to restore business processes, logistics and production chains, offset the reduction in profit and revenue, build up reserves and savings that have been used to a greater or lesser extent over the second quarter. Combined with uncertainty regarding potential changes in the external environment, this will limit production, investment and consumer activity. In these conditions, GDP will shrink yearon-year in the third and fourth quarters, that is the annual rate of economic growth will be negative. According to the Bank of Russia’s forecast, GDP will overall decrease by 4–6% in 2020. The major contributor to this reduction will be a decline in exports that may reach from 10% to 15%. Moreover, fixed capital investment will also substantially decrease (by 6– 10%) compared to the previous year. Companies will be primarily using their financial resources to restore their daily operations. Uncertainty about the prospects of domestic and external demand will be confining investment plans.