CONFIDENTIAL
47730
MDHI. 1249*
IN THE FOURTH QUARTER.
INFLATION
5. LOCAL INFLATIONARY PRESSURES REMAINED UNCOMFORTABLY HIGH. THE 1991 RATE OF INCREASE IN THE CPI(A) WAS AROUND 12 PERCENT, BUT CONSUMER PRICE INFLATION DECLINED IN THE LATTER HALF OF THE YEAR. THE RATE FOR DECEMBER 1991 WAS 10.3 PERCENT - THE LOWEST RECORDED FOR THE ENTIRE YEAR AND 3.6 PERCENTAGE POINTS BELOW THE PEAK OF 13.9 PERCENT IN APRIL. THE GOVERNMENTS SECOND PACKAGE OF COUNTER-INFLATION MEASURES. LAUNCHED IN NOVEMBER, AIMED TO CURB SPECULATION IN THE PROPERTY MARKET. AS A RESULT THIS AND A TIGHTENING UP ON MORTGAGE LENDING BY BANKS, THE PRICES OF RESIDENTIAL FLATS HAVE STABILISED.
ECONOMIC OUTLOOK FOR 1992
6. EXPORTS ARE EXPECTED TO CONTINUE TO GROW IN 1992, BUT AT A SLOWER RATE. THE RECENT WEAKNESS OF THE US DOLLAR SHOULD ENHANCE THE PRICE COMPETITIVENESS OF HONG KONG'S EXPORTS. MUCH DEPENDS ON WHETHER CHINA'S MFN STATUS WILL BE RENEWED BY THE USA.
7.
BOTH CONSUMPTION AND INVESTMENT EXPENDITURES ARE EXPECTED TO INCREASE FURTHER, THEREBY UNDERPINNING THE GROWTH IN DOMESTIC DEMAND. A FURTHER BOOST WILL COME FROM THE NEW AIRPORT PROJECTS. WITH IMPETUS FROM BOTH THE EXTERNAL AND THE DOMESTIC SECTORS, THE GROWTH RATE OF GDP IN 1992 COULD WELL BE HIGHER THAN IN 1991.
8 =
INFLATION IS EXPECTED TO MODERATE IN THE EARLY PART OF 1992. AFTER THAN MUCH WILL DEPEND ON THE ECONOMY, THE RESOURCE CONSTRAINTS AND THE DEMANDS ON THE CONSTRUCTION SECTOR FROM THE NEW AIRPORT PROJECTS.
WILSON
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