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HONG KONG: RECENT ECONOMIC PERFORMANCE
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Outlook:
Recovery continues and accelerates into 1992. Danger of overheating end year as PADS builds up. Inflation still number one economic policy issue with labour importation a close second.
GDP Growth: 1991 estimate 4.1% 1992 forecasts: Nomura
Nomura 5.2 % HongkongBank 5.0 % Hang Seng 4.7 % Slight increases in private and government consumption forecast over 1991 growth of around 6 per cent. GDI to rise by 12 % led by investment in plant and machinery at nearly 20 % (15% 1991) to reflect impact of PADS towards end of 1992. Net trade balance slightly negative.
Inflation: Headline rate down to 10.3 $/ (12/1991 on 12/1990) Tradeables at 9.0% Non-tradeables at 11.3% (attachment) Dampening factors: fuel -2.0% durable goods 3% and transport costs falling to 10%. Residential property prices stabilised but still in price bubble. Excess supply for commercial property has lowered prices and sufficient to supply new demands into 1993. Retail inflation may drop temporarily in February/ March as duty increases drop out.
Labour Market: Unemployment has fallen with economic recovery from peak of 2.4 % in second quarter 1991 to 1.8 % in fourth quarter. This is equivalent to 50,000 workers. Labour importation of 25,000 workers in 1992 just less than 1% of employed workforce. Suggests that outlook is tight labour market with unemployment below the NAIRU (estimated by Economic Services at 2.0-2.5% workforce). Real wages growth difficult to estimate. Flat for second quarter 1991 on year before. Size of year-end bonuses important.
Money and banking: Some tightening in credit market. Counter inflation package led major banks to raise mortgage downpayment to 30% in November to take heat out of private housing market. Sharp fall in applications seen in December. Broad money growth of 16% in year to November continues in line with nominal GDP. Best lending rate December at 8.5 % down from 10% a year earlier.
Budget: No sight as yet of the 1992/93 budget. Press reports Financial Secretary as saying no tax surprises in store but possible widening of personal tax allowances. Extra HK$ 10bn land revenues expected. Privatisation of postal services under consideration.
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Balance of Payments: Economic revival and low price inflation for tradeables contributing to expected trade balance deterioration. Figures: HK$ - 13.3bn year to 11/91 against HK$ 1.8bn in previous 12 months (exports fob- imports cif). Most action in 1992 continues in re-export trade again forecast to hit 20% real growth.
growth. Own exports hold up with growth in China market offsetting weakness in
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