XN000022-1980-08-19 — Page 3

IN

2

TUESDAY, AUGUST 19, 1980

EXTERNAL SECTOR

THE REPORT EMPHASIZES THE ENCOURAGING PERFORMANCE OF DOMESTIC EXPORTS OVERALL AND PARTICULARLY OF THOSE TO THE UNITED STATES. BUT IT EXPRESSES DOUBTS AS TO WHETHER SUCH AN ENCOURAGING PERFORMANCE COULD BE SUSTAINED FOR LONG. WHILE THE GROWTH RATE OF IMPORTS OF RAW MATERIALS AND SEMI-MANUFACTURES, NORMALLY A LEAD I NG INDICATOR OF FUTURE EXPORT PERFORMANCE, SUGGESTS THAT EXPORT PROSPECTS SHOULD REMAIN REASONABLY BRIGHT IN THE IMMEDIATE FUTURE, THE UNITED STATES ECONOMY HAD A NEGATIVE GROWTH RATE IN THE SECOND QUARTER OF THIS YEAR AND THE ORDER SITUATION WAS REPORTED TO BE NOT AT ALL PROMISING.

THE REPORT ALSO POINTS OUT THAT, AS ENVISAGED BY THE FINANCIAL SECRETARY IN HIS 1980 BUDGET SPEECH, THE GROWTH RATE OF THE VALUE OF IMPORTS ALMOST CAUGHT UP WITH THAT OF TOTAL EXPORTS (DOMESTIC EXPORTS PLUS RE-EXPORTS) IN THE FIRST HALF OF 1980, PRESUMABLY A REFLECTION OF THE PICK-UP IN THE GROWTH RATE OF DOMESTIC DEMAND. AS A CONSEQUENCE, THE VISIBLE TRADE GAP WAS 14.6 PER CENT IN THE FIRST HALF OF 1980, ONLY SLIGHTLY LESS THAN THE 15.3 PER CENT RECORDED IN THE FIRST HALF OF 1979.

FINANCIAL SECTOR

ON THE FINANCIAL SECTOR, THE REPORT EMPHASIZES THAT MOVEMENTS IN THE MONETARY AGGREGATES ARE DIFFICULT TO INTERPRET, PARTLY BECAUSE OF THE INADEQUACY OF THE MONETARY STATISTICS CURRENTLY AVAILABLE AND PARTLY BECAUSE OF DISTORTIONS CAUSED BY SUCH SEASONAL FACTORS AS THE LUNAR NEW YEAR IN FEBRUARY. IT HAS BECOME EVEN MORE DIFFICULT IN JUNE WHEN THE UNDERLYING TREND IN THE GROWTH RATE OF MONEY SUPPLY WAS OBSCURED BY THE FINANCIAL

IMPLICATIONS OF ACTIVITIES IN THE STOCK MARKET AND BY THE FACT THAT HALF-YEARLY INTEREST OF SAVING ACCOUNTS WAS CREDITED DURING THIS MONTH.

CONCERNING THE RECENT REDUCTIONS IN INTEREST RATES IN MAY AND JUNE, THE REPORT POINTS OUT THAT CONTRIBUTORY FACTORS TO SUCH DEVELOPMENTS WERE FIRST, THE SUCCESSIVE REDUCTIONS IN INTEREST RATES IN OTHER COUNTRIES, PARTICULARLY IN THE UNITED STATES AND SECOND, THE HIGH DEGREE OF LIQUIDITY IN THE LOCAL MONEY MARKET IN MAY AND EVEN MORE SO IN JUNE DEPRESSED MONEY MARKET RATES AND RESULTED IN STRONG COMMERCIAL PRESSURE ON THE BANKS TO LOWER THE IR INTEREST RATES.

LABOUR SECTOR

THE REPORT CONFIRMS THE VIEW EXPRESSED IN THE +1980-81 BUDGET SPEECH: ECONOMIC BACKGROUND+ AND THE FIRST QUARTER ECONOMIC REPORT 1980+ THAT, LARGELY BECAUSE OF AN INCREASED SUPPLY OF LABOUR AS A RESULT OF IMMIGRATION, A CLOSER BALANCE BETWEEN THE DEMAND FOR LABOUR AND THE SUPPLY OF IT WAS STARTING TO DEVELOP IN THE SECOND HALF OF 1979.

/IN SUPPORT