G.F. 316
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1985 Economic Prospects UNCLASSIFIED
139.
economy
for 1985
I turn now to my forecast of the (70). While we should continue to benefit from the expected
growth in the world
economy, Hong Kong remains as always
vulnerable to external events. The United States'
economy is expected to expand less rapidly: 3.5% growth has been assumed for 1985, compared with the 6.8% recorded for 1984. Thus some slowing down in the growth rate of domestic exports to the United States in 1985 is likely. Protectionism everywhere is a
constant threat.
For example the change in the textile and clothing imports into
country-of-origin rules for
the United States last year introduced an additional element of uncertainty, and Hong Kong industries will need time to make
adjustments.
The
140. China is now Hong Kong's second largest domestic export
market, though still well behind the United States. prospect is
that all aspects of trade between Hong Kong and China will continue to grow rapidly. Exports to the European markets, on the other hand, are largely dependent on the
economic performance of these countries and on the extent to which the competitiveness of Hong Kong products is maintained. During the second half of 1984 because of the global strength of the US dollar, the Hong Kong dollar strengthened by 11% against the Deutschemark and 14% against the pound sterling. With this happening at a time when Hong Kong's inflation rate was higher than that of West Germany or the United Kingdom, Hong Kong products became relatively more expensive in these markets. This difficulty continues.
141.
Taking the above
factors into consideration, the
forecast of the growth rate of domestic exports in 1985 is 11% in real terms, rather less than the 17% achieved in 1984. This, combined with a forecast growth rate of re-exports of 30%, gives a growth forecast for total exports of 18%, compared with 22% in 1984. If achieved, this will still be very satisfactory.
(70) See "1985 Economic Prospects".
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