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"We expect that Hong Kong's status as a Special Administrative Region will create new trade and investment opportunities as the modernisation process continues to transform the Chinese economy," he said.
"We forecast that Hong Kong's exports of services will grow by 8%. Total exports of goods will grow by 8.5%, with domestic exports static but re-exports rising by 10%."
Now that the Airport Core Programme projects had entered the final stage, Mr Tsang expected the public sector investment to slow down in 1997. Mr Tsang was also aware of the pressure on consumer prices as a result of faster economic growth.
"Lower unemployment rates could also put pressure on wages," he said.
"Hence we are expecting the Consumer Price Index (A) to rise at a somewhat higher rate than last year and to record an average increase of 7% for 1997."
In his speech Mr Tsang also summarised Hong Kong's performance in 1996.
"The key feature of our performance in 1996 was the speed at which the economy turned itself round. GDP growth reached a low point of 3.3% in the first quarter of last year. In the second half of 1996, GDP was already growing faster than our medium-term trend forecast of 5%. For the year as a whole, GDP grew by 4.7%," he said.
Accounting for this performance, Mr Tsang said that the recovery was generated mainly by revival in consumer spending. Private consumption expenditure rose by 4% for the year as a whole.
He supplemented: "The revival reflected:
a rise of 3.2% in real household income,
a decline to 6.7% in the inflation rate by the end of the year, and
a fall to 2.6% in the unemployment rate by the fourth quarter.
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Mr Tsang observed that the strong growth of investment also underpinned performance. Gross Domestic Fixed Capital Formation rose by 11%, the second highest rate recorded so far in the 1990s.
On external trade, a growth rate of 6% was recorded for export of services.