XN000022-1980-02-27 — Page 6

WEDNESDAY, FEBRUARY 27, 1980

TURNING TO HONG KONG'S FINANCIAL POSITION, SIR PHILIP SAID THAT AT APRIL 1 HONG KONG WOULD HAVE +FREE+ REŠERVES OF AROUND $5 700 MILLION TO FINANCE ITS SEASONAL DEFICITS ON GENERAL REVENUE ACCOUNT, AND ANY UNEXPECTED SHORT TERM DIFFICULTIES AND

EMERGENCY SITUATIONS WHICH COULD NOT BE - AND, INDEED, SHOULD NOT BE DEALT WITH BY A REVISION OF EXPENDITURE AUTHORITIES OR BY FISCAL MEASURES.

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+THE LEVEL OF OUR 'FREE' FISCAL RESERVES IS ALSO SUCH AS TO ENABLE US TO MAINTAIN A GIVEN LEVEL OF EXPENDITURE, WITHOUT RESORTING TO DEBT FINANCE, AS AND WHEN THE REVENUE AND EXPENDITURE ESTIMATES BREACH THE RELEVANT GUIDELINES- AND AS AND WHEN THE FINANCING OF CAPITAL EXPENDITURE BECOMES MORE DEPENDENT AGAIN ON THE SURPLUS ON RECURRENT ACCOUNT, HE SAID.

HK'S GDP IN 1980 TO GROW BY NINE PER CENT

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THE FINANCIAL SECRETARY, THE HON SIR PHILIP HADDON-CAVE, TODAY (WEDNESDAY) FORECAST THAT HONG KONG'S GROSS DOMESTIC PRODUCT (GDP) WOULD GROW BY NINE PER CENT IN REAL TERMS IN 1980 COMPARED WITH THE ACHIEVED GROWTH RATE OF 11.5 PER CENT IN 1979.

PRESENTING HIS BUDGET FOR 1980-81 IN THE LEGISLATIVE COUNCIL, SIR PHILIP SAID IN PER CAPITA TERMS, ASSUMING THE GROWTH RATE OF THE POPULATION TO BE ABOUT 4.1 PER CENT, THE GROWTH RATE OF GDP PER CAPITA WOULD BE FIVE PER CENT, ROUGHLY THE SAME AS THE ACHIEVED GROWTH RATE OF 4.8 PER CENT IN 1979. THE GROWTH RATE OF REAL INCOME PER CAPITA WILL ALSO BE ABOUT FIVE PER CENT.

IN MONEY TERMS, THE GDP GROWTH RATE IN 1980 IS 21 PER CENT. THIS IMPLIES THAT TOTAL EXPENDITURE ON GDP AT CURRENT PRICES WILL BE $106 000 MILLION, IN PER CAPITA TERMS, GDP AT CURRENT PRICES WILL BE ALMOST $21 000 REPRESENTING A GROWTH RATE OF 17 PER CENT, COMPARED WITH THE ACHIEVED GROWTH RATE OF 18.7 PER CENT IN 1979.

HE ALSO PREDICTED THAT THE RATE OF INCREASE IN CONSUMER PRICES IN HONG KONG IN 1980 WAS 10 PER CENT REPRESENTING A SLOWDOWN FROM THE ACTUAL RATE OF INCREASE OF 11.6 PER CENT IN 1979, WHILE THE RATE OF INCREASE IN THE GENERAL PRICE LEVEL - THE GDP DEFLATOR WAS 11 PER CENT COMPARED WITH AN ACTUAL 13.3 PER CENT INCREASE IN

1979.

SIR PHILIP ALSO ANALYSED THE GROSS DOMESTIC PRODUCT IN 1980 BY COMPONENT.

FOR PRIVATE CONSUMPTION EXPENDITURE PRICE, HE FORECAST A NINE PER CENT GROWTH RATE WHICH WAS LESS THAN MIGHT BE IMPLIED BY THE GROWTH RATE OF REAL INCOME IN 1979, AND THE FORECAST GROWTH RATE FOR 1980. THERE ARE THREE POSSIBLE REASONS FOR THIS FIRST, A RELATIVELY HIGH RATE OF INCREASE IN PRICES MAY, WHEN ALLIED WITH UNCERTAINTIES FACING OUR ECONOMY, EXERT A CONSTRAINING EFFECT ON CONSUMPTION AND PROVIDE A GREATER INCENTIVE TO SAVE.

/SECONDLY,