XN000022-1980-05-20 — Page 2

TUESDAY, MAY 20, 1980

HK AGAIN HAVING EXPORT-LED ECONOMIC GROWTH

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ECONOMIC GROWTH IN 1979 WAS ONCE AGAIN EXPORT-LED AND THIS HAS PROBABLY CONTINUED TO BE SO IN THE FIRST QUARTER OF 1980, ACCORDING TO THE GOVERNMENT'S FIRST QUARTER ECONOMIC REPORT RELEASED TODAY.

THE REPORT BRINGS UP-TO-DATE THE ANALYSES IN THE ECONOMIC BACKGROUND DOCUMENT PUBLISHED ON BUDGET DAY. BESIDES ASSESSING ECONOMIC TRENDS IN THE FIRST QUARTER OF 1980, IT REVISES THE ANALYSES OF THE ECONOMY'S BEHAVIOUR IN 1979 IN THE LIGHT OF THE LATEST INFORMATION.

THE REPORT POINTS OUT THAT THE GROWTH RATE OF DOMESTIC DEMAND SLOWED DOWN IN 1979 AND AS A RESULT THE IMBALANCE BETWEEN THE DEMAND FOR AND THE SUPPLY OF DOMESTIC RESOURCES STARTED TO CORRECT ITSELF.

THE MOST CONSPICUOUS SIGNS OF SUCH A CHANGE WERE IN THE LABOUR SECTOR WHERE CONDITIONS IN THE FIRST QUARTER OF 1980 WERE LESS TIGHT THAN THEY WERE A YEAR AGO, IT SAYS.

AS FOR INFLATION, IT SUGGESTS THAT THERE IS A REAL PROSPECT THAT DOMESTICALLY GENERATED INFLATION WILL EASE OFF.

ALTHOUGH IMPORTED INFLATION WILL CONTINUE TO BE A FEATURE, IT POINTS OUT THAT MOVEMENTS IN THE EXCHANGE RATE IN THE PAST NINE MONTHS OR SO HAVE BEEN EXERCISING A FAVOURABLE EFFECT ON IMPORT PRICES AND SO THE PROSPECTS ARE THAT INFLATION IS UNLIKELY TO CONTINUE AT ITS PRESENT RATE,

THERE IS CONCERN ABOUT THE UNDERLYING GROWTH RATES OF THE MONETARY AGGREGATES, BUT IT POINTS OUT THAT IT IS NOT EASY TO IDENTIFY THE PRECISE IMPACT ON THE ECONOMY OF MOVEMENTS IN THESE AGGREGATES. PARTICULARLY WHEN THE STRUCTURE OF THE FINANCIAL SECTOR IS CHANGING RELATIVELY RAPIDLY.

THE REPORT CONTAINS INDIVIDUAL CHAPTERS ON THE EXTERNAL SECTOR, THE FINANCIAL SECTOR, THE LABOUR SECTOR, AND PRODUCTION AND PRICES, PRECEDED BY A CHAPTER GIVING THE OVERALL VIEW.

ON THE EXTERNAL SECTOR, IT EMPHASISES THAT THE GROWTH RATE OF TOTAL EXPORTS IN 1979 WAS HIGHER THAN THAT OF IMPORTS AND THAT THIS CONTINUED TO BE THE SITUATION IN THE EARLY MONTHS OF THIS YEAR, SO THAT THE VISIBLE TRADE +GAP+, THAT IS THE PROPORTION OF THE VALUE OF IMPORTS NOT COVERED BY RECEIPTS FROM TOTAL EXPORTS, HAS BEEN NARROWING.

IT ADDS HOWEVER THAT DEVELOPMENTS IN THE ECONOMIES OF HONG KONG'S MAJOR MARKETS ARE SUCH THAT THE PROSPECTS FOR HONG KONG'S DOMESTIC EXPORTS HAVE BECOME INCREASINGLY UNCERTAIN, SUGGESTING THAT THE GAP MAY STOP NARROWING IN THE NOT TOO DISTANT FUTURE. CONSISTENT WITH THE VIEW TAKEN BY THE FINANCIAL SECRETARY IN HIS SPEECH ON APRIL 16, 1980 CONCLUDING THE BUDGET DEBATE.

/ON THE