EDNESDAY, FEBRUARY 28, 1979
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+AFTER MAKING DUE ALLOWANCE FOR EXPORTS LESS IMPORTS OF SERVICES AND FOR ADJUSTMENTS TO STOCKS, THE FINAL FORECAST FOR THE GROWTH RATE OF GDP IS SEVEN PER CENT COMPARED WITH EIGHT PER CENT IN THE INITIAL FORECAST. THUS THE FINAL FORECAST OF GDP AT CONSTANT (1966) PRICES 13 $31,160 MILLION. +
THE FINANCIAL SECRETARY POINTED OUT, HOWEVER, THAT ALTHOUGH THE FINAL GDP FORECAST IS AN IMPROVEMENT ON THE INITIAL FORECAST, ITS
IMPLICATIONS ARE STILL UNSATISFACTORY IN TERMS OF THE NECESSARY EMPHASIS OF BUDGETARY POLICY IN 1979-80.
FIRST, THE GROWTH RATE OF TOTAL FINAL DEMAND AT ABOUT NINE PER CENT EXCEEDS THE GROWTH RATE OF GDP AT SEVEN PER CENT. AS A CONSEQUENCE, THE GROWTH RATE AT WHICH IMPORTS ARE SUCKED IN CONTINUES TO BE RAPID AT 10 PER CENT.
SECOND, THE GROWTH RATE OF DOMESTIC DEMAND AT NINE PER CENT EXCEEDS THE GROWTH RATE OF EXPORTS AT EIGHT PER CENT. THIS IS AN IMPROVEMENT ON THE INITITAL FORECAST, BUT IT STILL REPRESENTS A RELATIVE WORSENING IN THE SHARE OF RESOURCES GOING TO EXPORTS COMPARED WITH 1978.
THIRD, WITHIN DOMESTIC DEMAND THERE IS ACTUALLY A SLIGHT DECREASE IN THE SHARE OF RESOURCES USED BY THE PUBLIC SECTOR COMPARED WITH THE GROWTH RATE IN THE INITIAL FORECAST OF 17 PER CENT AND 10 PER CENT RESPECTIVELY, THE GROWTH RATE OF PUBLIC SECTOR DEMAND AT EIGHT PER CENT IS LESS THAN THE GROWTH RATE OF PRIVATE DOMESTIC DEMAND AT NINE PER CENT.
FOURTH, THE GROWTH RATE OF IMPORTS AT 10 PER CENT STILL EXCEEDS THE GROWTH RATE OF EXPORTS AT EIGHT PER CENT. AS A RESULT THE VISIBLE TRADE DEFICIT CONTINUES TO WIDEN.
FIFTH, AS A RESULT OF THE TRADE DEFICIT WIDENING LESS THAN IN THE INITIAL FORECAST AND WITH THE GROWTH RATE OF TOTAL FINAL DEMAND BEING REDUCED FROM 10 PER CENT IN THE INITIAL FORECAST TO UNDER NINE PER CENT, THE DOWNWARD PRESSURE ON THE EXCHANGE VALUE OF THE HONG KONG DOLLAR SHOULD BE LESS. BUT THE TERMS OF TRADE, DEPENDING ON THE COURSE OF EXPORT PRICES, MAY DETERIORATE SLIGHTLY.
SIXTH, WITH THE GROWTH RATE OF GDP, THE IMBALANCE BETWEEN THE DEMAND FOR, AND THE SUPPLY OF, DOMESTIC RESOURCES STILL PERSISTS. BUT, WITH SOME SLACKENING OF THE PRESSURE OF DEMAND ON RESOURCES, THE RATE OF INCREASE IN PRICES SHOULD BE LESS THAN SHOWN IN THE INITIAL FORECAST.
MR. HADDON-CAVE ADDED THAT CONSUMER PRICES SHOULD SHOW A RATE OF INCREASE OF ABOUT NINE PER CENT COMPARED WITH 10 PER CENT IN THE INITIAL FORECAST, BUT THE GDP DEFLATOR SHOULD SHOW A RATE OF INCREASE OF ONLY EIGHT PER CENT COMPARED WITH 11 PER CENT FOR THE INITIAL FORECAST. THIS IMPLIED A FORECAST OF THE GROWTH RATE OF GDP AT CURRENT PRICES OF JUST UNDER 16 PER CENT BRINGING IT TO A VALUE OF $73,600 MILLION.
+SO, AS A RESULT OF REDUCING THE GROWTH RATE OF GOVERNMENT EXPENDITURE, THIS FINAL FORECAST REPRESENTS AN IMPROVEMENT OVER THE INITIAL FORECAST, PARTICULARLY AS REGARDS THE IMPLIED THREAT OF INFLATION, MR. HADDON-CAVE SAID.
BUT HE EMPHASISED THAT THERE WAS STILL A NEED FOR A FURTHER RESTRAIN OF DOMESTIC DEMAND BEFORE THE GROWTH RATE OF THE ECONOMY WAS SUSTAINABLE PARTICULARLY IN RESPECT OF THE TRADE DEFICIT.