XN000022-1977-03-02 — Page 8

WEDNESDAY, MARCH 2, 1977

SEVEN PER CENT GROWTH IN GDP FORECAST

******

THERE WILL BE A SEVEN PER CENT INCREASE THIS YEAR IN HONG KONG'S REAL GROSS DOMESTIC PRODUCT, INCLUDING STOCK CHANGES, THE FINANCIAL SECRETARY, THE HON. PHILIP HADDON-CAVE, PREDICTED IN HIS BUDGET TODAY,

FORECASTING HONG KONG'S SHORT-TERM ECONOMIC OUTLOOK.

MR. HADDON-CAVE WARNED: +FURTHER GROWTH WILL BE CONSTRAINED BY THE GROWTH IN THE LABOUR FORCE AND IN PRODUCTIVITY, AS IT IS ACCEPTED THAT THE ECONOMY REACHED FULL CAPACITY DURING 1976.

HE NOTED THAT THE LABOUR FORCE WAS UNLIKELY TO GROW MUCH MORE THAN THREE TO FOUR PER CENT AND THE MAXIMUM THAT COULD BE EXPECTED FOR PRODUCTIVITY GROWTH WAS ANOTHER THREE TO FOUR PER CENT.

+THIS SUGGESTS, THEREFORE, A CEILING FOR 1977 OF BETWEEN 6 AND 8 PER CENT.+

MR. HADDON-CAVE SAID CONSUMER PRICES THIS YEAR WOULD BE INFLUENCED BY THE EXPECTED ACCELERATION OF WORLD PRICES OF FOODSTUFFS AND CONSUMER GOODS. HE DID NOT THINK THAT THERE WOULD BE FURTHER PROTECTION FROM A STRENGTHENING HONG KONG DOLLAR.

FOR LOCALLY DETERMINED PRICES, HE ADDED, THE MORE RAPID INCREASE IN PRIVATE CONSUMPTION EXPENDITURE COMPARED WITH THE TOTAL GROSS DOMESTIC PRODUCT WOULD ALSO EXERT SOME UPWARD PRESSURE.

+! EXPECT THE CONSUMER PRICE INDEX IN 1977 WILL BE ON AVERAGE FIVE TO SIX PER CENT HIGHER THAN THE AVERAGE FOR 1976, WITH FOOD PRICES ABOUT FOUR PER CENT HIGHER (THOUGH THIS WILL ́ DEPEND ON THE SUPPLY POSITION), HE SAID.

ON THE CONSTRUCTION INDUSTRY, MR. HADDON-CAVE EXPECTED AN INCREASE IN DEMAND SOME 20 TO 30 PER CENT HIGHER THAN LAST YEAR'S OUTPUT.

HE SAID IT SEEMED LIKELY THAT THERE WOULD BE AN EXCESS DEMAND EQUAL TO ABOUT 10 PER CENT OF THE INDUSTRY'S CAPACITY.

+BECAUSE THE ESTIMATES FOR CAPITAL EXPENDITURE BY THE PUBLIC SECTOR ARE MORE REALISTIC, I BELIEVE PRESSURES ON COSTS ARE MORE LIKELY THAN SHORTFALLS BECAUSE OF CROWDING OUT BY THE PRIVATE SECTOR, HE ADDED.

IN THE MEDIUM TERM, THE FINANCIAL SECRETARY SOUNDED A NOTE OF WARNING THAT THE RAPID RECOVERY IN WORLD TRADE LAST YEAR WAS EXPECTED TO SLOW DOWN GRADUALLY DURING THIS AND THE NEXT YEAR.

/HE POINTED