S
7
difficult patch.
Unfortunately at this time conditions in 1978 re ̈
particularly difficult to forecast. It is still impossible to discern signs
of the improvement in confidence and activity in the American and European
markets which would be of such value to world trade in general and Hong
Kong in particular. In addition to special factors in some countries, fear
of inflation, uneasily balanced by fear of unemployment, still inhibits
reflationary measures.
Nevertheless demand for economic stimul tion is
becoming stronger, more general and more authoritative and may well
affect policies in 1978. Even if it does not, we can still confidently
expect continuing economic growth in all our major markets in 1978 of about
the same order as in 1977. Growth in the United States at about 4.5-5 may
be a little below this year's figure, that in the UK at 2-3 a little above
it, and in Germany at 4-5% about the same. It is also true that a fairly
optimistic view is taken of the growth of world trade in 1978, which is
expected to increase by 8% as against 65 in 1977.
19.
Taking all these factors together one might say that prospects were
reasonably good but not brilliant, but would in the short term be
significantly improved by any early and effective steps to stimulate the
major economies.
20.
Turning to our own trading fortunes, these should be favoured by
the falling level of stocks expected in Germany and the prospect of in-
crease consumption in the UK. Moreover our export prices in Hong Kong
dollars have remained stable since the middle of 1976; although there was
some appreciation of the HK dollar in the second half of 1976 and early
1977, it has depreciated in the last few months. So with world export
prices increasing at about 8-9% a year our competitive position ic being
gradually regained. Given the comparatively optimistic forecusts for
world trade in 1978, the underlying conditions for more rapid growth
in our domestic exports could be present, at least for the wide field of
/iteno.
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