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Economic situation in the first quarter of 1995
In the May update of the economic forecasts for 1995, the forecast growth rate in real terms of Gross Domestic Product (GDP) is maintained at 5.5%.
The good performance of exports of both goods and services, coupled with the strong growth in fixed asset investment, should provide the key impetus to overall economic growth, notwithstanding the recent slow-down in consumer spending.
The forecast of consumer price inflation, as measured by the rate of increase in the Consumer Price Index (A), is however revised upwards from 8.5% to 9.0%, mainly in the light of greater imported inflation experienced in the first four months of the year.
As the effect of higher import prices continues to filter through, inflation is likely to remain high in the next couple of months.
But with the exchange value of the US dollar becoming more stable, and with locally-generated inflationary pressures likely to be alleviated somewhat by the recent easing of the labour market and the softening in property rentals, inflation should edge lower in the latter part of the year.
In the first quarter of 1995, the growth rates of both re-exports and domestic exports picked up sharply. Concurrently, there should have been a sustained notable growth in exports of services, particularly offshore trading and the various services supporting exports of goods.
Locally, investment spending in the first quarter continued to be underpinned by a strong absorption of machinery and equipment, as well as intensive activity in building and construction.
The sluggish retail sales and restaurant business were a combined result of moderation in both local consumer and tourist spendings. Local consumer spending should nevertheless still register a modest growth in the first quarter, against an exceptionally high base of comparison in the same quarter last year. Meanwhile, the number of visitor arrivals had rebounded in the past few months.
Although the visible trade deficit had widened further in the first quarter, this was to a considerable extent caused by a greater in-take of imports for production and capacity enhancement.