WEDNESDAY, IMBRUARY 25, 1975
J
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MOVING ON TO THE WORLD ECONOMY, HE SAID IT WAS IN RECESSION AT THE BEGINNING OF 1975. THE MAJOR ECONOMIES OF THE ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (O.E.C.D.) HAD, ON AVERAGE, EXHIBITED LITTLE OR NO GROWTH IN OUTPUT IN 1974.
THE SYMPTONS OF RECESSION INCLUDED A RAPIDLY RISING LEVEL OF UNEMPLOYMENT, PARTICULARLY MARKED IN SOME OF HONG KONG'S MAJOR MARKETS, TOGETHER WITH FALLS IN THE QUANTITIES OF SOME TRADE FLOWS.
AT THE SAME TIME, THE EASING OF DEMAND PRESSURES HAD LED TO A FALL IN THE PRICES OF RAW MATERIALS, OTHER THAN OIL. INTEREST RATES, TOO, HAD DECLINED SHARPLY BY THE END OF 1974.
DUE TO THE WEAKNESS OF DEMAND AND ALSO BECAUSE INFLATIONARY PRESSURES WERE BEGINNING TO SHOW SIGNS OF EASING, THE STANCE OF POLICY IN MOST COUNTRIES HAD NOW SHIFTED IN THE DIRECTION OF EXPANSION. BUT THE FEAR OF INFLATION AND THE BALANCE OF PAYMENT PROBLEMS THAT DEVELOPED IN THE WAKE OF THE HUGE INCREASE IN OIL PRICES HAD COMBINED TO RESTRICT THE SCOPE FOR EXPANSIONARY POLICIES,+
ALL IN ALL, THE FINANCIAL SECRETARY THOUGHT IT REASONABLE
TO LOOK FORWARD TO THE BEGINNING OF A RECOVERY IN WORLD OUTPUT AND TRADE BEFORE THE END OF 1975. BUT BECAUSE THE FIRST HALF OF 1975 IS LIKELY TO CONTINUE DEPRESSED. THE YEAR AS A WHOLE IS UNLIKELY TO SHOW MUCH GROWTH OF OUTPUT OR TRADE.+
MR. HADDON-CAVE ALSO SPOKE ON THE ECONOMIC AND FINANCIAL BACKGROUND IN 1973 AND 1974.
IN TERMS OF REAL GROWTH, HE SAID 1973 WAS A REMARKABLY GOOD YEAR FOR THE ECONOMY. THE GROSS DOMESTIC PRODUCT IN REAL TERMS INCREASED BY 12-1/2 PER CENT OR AT DOUBLE THE AVERAGE ANNUAL RATE OVER THE PREVIOUS THREE YEARS.
IN PER CAPITA TERMS THE INCREASE WAS TEN PER CENT IN 1973 COMPARED WITH AN AVERAGE ANNUAL RATE OF FOUR PER CENT OVER THE PREVIOUS THREE YEARS.
INCOME DERIVED FROM VISIBLE EXPORTS WAS EQUIVALENT TO ALMOST HALF THE GROSS DOMESTIC PRODUCT. A MAJOR FACTOR IN THIS GROWTH WAS THE BUOYANCY OF OVERSEAS DEMAND, BUT IT WAS ACHIEVED IN THE FACE OF WIDE FLUCTUATIONS IN EXCHANGE RATES AND AN EXCEPTIONAL RATE OF INFLATION ABROAD WHICH LED TO A DETERIORATION IN OUR TERMS OF TRADE.
BY THE END OF 1973 AND THE EARLY PART OF 1974 IT WAS CLEAR THAT THE RAPID GROWTH IN 1973 COULD NOT BE SUSTAINED, EITHER IN THE WORLD ECONOMY OR IN OUR OWN, HE SAID.
THE OIL CRISIS WAS THE SINGLY MOST IMPORTANT REASON FOR THIS. WHILE THE THREAT OF A SHORTAGE OF SUPPLIES WAS SOON LIFTED, THE REPERCUSSIONS OF THE 350 PER CENT INCREASE IN CRUDE OIL PRICES BETWEEN SEPTEMBER 1973 AND JANUARY 1974 HAD CONTINUED TO SPREAD THROUGHOUT THE WORLD AS A HIGHER PROPORTION OF NON-OIL PRODUCING COUNTRIES" FOREIGN EXCHANGE EARNINGS HAD BEEN APPLIED TO THEIR FUEL BILLS,
IN ADDITICE!, *****