WEDNESDAY, MAY 4, 1988
- 3.
PREMATURE TO REVISE FORECASTS FOR GDP
*
THE
THERE WERE TRENDS THAT SUGGESTED THE GROWTH RATE OF HONG KONG'S ECONOMY WAS SLACKENING AND IT WOULD BE PREMATURE TO REVISE FORECASTS FOR EITHER THE GROSS DOMESTIC PRODUCT (GDP) OR INFLATION, THE FINANCIAL SECRETARY, THE HON PIERS JACOBS, TOLD THE LEGISLATIVE COUNCIL TODAY (WEDNESDAY).
WINDING UP THE BUDGET DEBATE, MR JACOBS SAID THE TREND OF SLOWER GROWTH IN DOMESTIC EXPORTS BEGAN TOWARDS THE END OF LAST YBAR, AND IN THE FIRST QUARTER OF THIS YEAR, THE GROWTH RATE OF DOMESTIC EXPORTS AND RETAINED IMPORTS HAD CONTINUED TO SLOW DOWN.
MR JACOBS SAID HE SHARED SOME
OF THE CONCERNS EXPRESSED BY SOME COUNCILLORS IN THE LIGHT OF THE CURRENT UNCERTAINTY ABOUT THE PROSPECTS FOR THE WORLD ECONOMY, AND THE RECENT TENDENCY FOR PRICES TO EDGE UP.
H
"A NUMBER
OF MEMBERS HAVE WARNED OF THE RISK OF RISING
INFLATION AND ITS INHERENT DANGERS," MR JACOBS SAID.
HE SAID THE SENIOR MEMBER HAD WARNED THAT BOTH THE INFLATION FORECAST FOR 1988-89 OF SEVEN PER CENT AND THE INFLATION ASSUMPTION UNDERLYING THE MEDIUM RANGE FORECAST OF 5.5 PER CENT MIGHT BE TOO LOW.
OTHER MEMBERS, HE SAID, HAD WARNED THAT THE CURRENT TIGHT LABOUR MARKET AND, IN PARTICULAR, THE PRESSURE THAT WOULD BE PUT ON IT BY THE PLANNED EXPANSION IN THE CIVIL SERVICE WOULD CONTRIBUTE ΤΟ INFLATION.
"IN PUTTING TOGETHER MY BUDGET PACKAGE I WAS AWARE OF THE RISK THAT INCREASED SPENDING AND REDUCED TAXATION COULD PROVIDE AN UNDESIRABLE STIMULUS TO THE ECONOMY GIVEN THAT IT WAS ALREADY OPERATING CLOSE TO ITS CAPACITY LIMITS.
"I TOOK THE VIEW, HOWEVER, THAT BECAUSE THE OVERALL GROWTH RATE OF THE ECONOMY WAS EXPECTED TO SLOW DOWN, THE LIMITED DEGREE OF STIMULUS INVOLVED IN THE PACKAGE PRESENTED WAS TOLERABLE, ** MR JACOBS SAID.
NOTING THAT THERE WERE SIGNS THAT THIS WAS HAPPENING, THE FINANCIAL SECRETARY SAID THAT OVER THE LONGER TERM, THE LINK BETWEEN THE U.S. DOLLAR AND THE HONG KONG DOLLAR SHOULD MEAN THAT THERE WAS A TENDENCY FOR THE INFLATION RATE IN THE TERRITORY TO FOLLOW THAT IN THE UNITED STATES, ALTHOUGH THERE MIGHT BK SIGNIFICANT DEVIATIONS FROM TIME TO TIME.
"THE U.S.
INFLATION RATE IS CURRENTLY AROUND FOUR PER CENT AND TENDING TO RISE, BUT IF THE U.S. ECONOMY SLOWS DOWN IN 1989 OR 1990 AS EXPECTED, THE INFLATION RATE THERE SHOULD FALL AGAIN, MR JACOBS
14
SAID.
/TRUS,
INFLATION