28.
This pattern of growth gives a forecast growth rate
of GDP for 1988 of 5% (12). My forecast leads me to the
following conclusions. First, given the tight labour market in 1987 the unemployment rate is likely to remain low this
this year despite a reduced rate of economic growth. Secondly, the rate of inflation is expected to average about 7% (13). Thirdly, as
total final demand in the economy is likely to rise faster than the supply of output, some of this growth in demand will have to be met by additional imports (14). Thus, Our imports are
forecast to grow by 9.5%, and our retained imports by slightly over 7%. This, coupled with a slight further deterioration in
the terms of trade, should result in an increased visible trade
deficit, giving further weight to some of the arguments I
advanced against revaluation of our currency when I spoke of the state of the economy in 1987 a moment ago (15). And lastly, the
forecast growth rate of the GDP in money terms is about 13% in 1988. At current prices, per capita GDP would thus reach about $72,000, equivalent to US$9,200.
(12) The forecast growth rates of the various major components of expenditure
on the GDP in 1988 are as follows:
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Private consumption expenditure Government consumption expenditure Gross domestic fixed capital formation
6.5
5.6
4.0
Of which, in building and construction
in plant and machinery
3.8
3.9
Total exports of goods
8.8
Domestic exports
6.0
Re-exports
Imports of goods
12.0
9.5
Net exports of services
Gross domestic product
10.0
5.0
For further details, see '1988 Economic Prospects'.
(13) Rate of increase of the CPI (A) 7%; of the GDP deflator 7.5%.
(14) The forecast growth rate of total final demand (excluding re-exports), at
slightly over 6%, is higher than that of GDP, at 5%.
(15) Import prices are forecast to increase by 4.5%. Compared with a
corresponding increase of 4.1% for export prices, this would give a deterioration of 0.4% in the terms of trade in 1988. The forecast of the visible trade deficit for 1988 is about $6 billion, equivalent to 1.4% of the total value of imports of goods.
/STRATEGY