125
CONFIDENTIAL
FM HONG KONG
TO DESKBY 16093OZ FCO
TELNO 1850
OF 16084OZ MAY 88
CONFIDENTIAL
HKB 007/3
TOP COPY
DIST ?
MIPT: SECRETARY OF STATE'S VISIT TO HONG KONG: BRIEF ON THE
HONG KONG ECONOMY
BEGINS:
016561
MDHIAN 9539
1. WHILE THE ECONOMY REMAINS GENERALLY BOUYANT THERE HAS BEEN A
SLOW-DOWN IN THE GROWTH RATE OF DOMESTIC EXPORTS SINCE THE THIRD QUARTER OF 1987. IN THE FIRST QUARTER OF THIS YEAR, DOMESTIC EXPORTS GREW BY ABOUT 11 PERCENT IN REALTERMS OVER A YEAR EARLIER, COMPARED WITH GROWTH RATES OF 15 PERCENT IN THE FOURTH QUARTER OF LAST YEAR AND OF 23 PERCENT FOR 1987 AS A WHOLE.
AS HONG KONG IS AN EXPORT-ORIENTED ECONOMY, A SLACKENING IN THE GROWTH RATE OF DOMESTIC EXPORTS IS EXPECTED TO RESULT IN A
SLOW-DOWN IN THE GROWTH RATE OF THE ECONOMY GENERALLY.
2. THE LABOUR MARKET IS STILL TIGHT. THE SEASONALLY ADJUSTED
UNEMPLOYMENT RATE IN THE FIRST QUARTER OF 1988 WAS AT AN HISTORIC LOW OF 1.6 PERCENT, ALTHOUGH THIS WAS PARTLY DISTORTED BY A REDUCED
LABOUR SUPPLY DURING THE LUNAR NEW YEAR PERIOD IN FEBRUARY. LABOUR SHORTAGES CONTINUE TO BE REPORTED, PARTICULARLY IN BUILDING AND CONSTRUCTION. WAGES AND SALARIES HAVE RISEN RAPIDLY OVER THE PAST YEAR OR SO AND THE LEVEL OF VACANCIES IS STILL HIGH, BUT THERE ARE EARLY SIGNS THAT THE PRESSURE OF DEMAND FOR LABOUR MAY HAVE
BEGUN TO EASE.
3. THE PRESENT TAE OF INFLATION IS FAIRLY HIGH COMPARED WITH HONG
KONG'S MAJOR OVERSEAS MARKETS AND WITH THE NEIGHBOURING ECONOMIES
WHICH ARE HONG KONG'S MAIN EXPORT COMPETITORS. THE CONSUMER PRICE INDEX (A) SHOWED A YEAR-ON-YEAR RATE OF INCREASE OF 6.8 PERCENT IN THE FIRST QUARTER OF THIS YEAR, COMPARED WITH CORRESPONDING RATES OF INCREASE OF 5.6 PERCENT AND 6.7 PERCENT IN THE PREVIOUS
TWO QUARTERS. IT IS LIKELY THAT THE INFLATION RATE WILL INCREASE
FURTHER IN THE SHORT TERM, BEFORE IT FALL AGAIN IN LINE WITH THE EXPECTED SLOW-DOWN IN THE GROWTH RATE OF THE ECONOMY.
4. FOLLOWING TWO CONSECUTIVE YEARS OF DOUBLE-DIGIT GROWTH, HONG KONG'S GROSS DOMESTIC PRODUCT IS FORECAST TO INCREASE BY 5 PERCENT
IN REAL TERMS IN 1988. THIS GROWTH IS EXPECTED TO BE MORE BALANCED
BETWEEN EXTERNAL TRADE AND DOMESTIC DEMAND THAN IN 1987. THE RATE
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