XN000022-1980-09-12 — Page 4

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FRIDAY, SEPTEMBER 12, 1980

GOVERNMENT CONSUMPTION EXPENDITURE

THE GROWTH RATE IN REAL TERMS WAS ABOUT 5 PER CENT IN THE FIRST HALF OF THE YEAR, COMPARED WITH THE FIRST HALF OF 1979. THIS IS MUCH LESS THAN THE BUDGET SPEECH FORECAST FOR THE YEAR AS A WHOLE OF 12 PER CENT. SIR PHILIP SET OUT THREE REASONS FOR THIS SHORTFALL. ALTHOUGH HE HAD EVERY REASON TO BELIEVE THAT THEY WILL NOT BE AS OPERATIVE IN THE SECOND HALF OF THIS YEAR, THE SLOW GROWTH RATE IN THE FIRST HALF MEANS THAT THE BUDGET SPEECH FORECAST WOULD HAVE TO BE REDUCED TO 8 PER CENT, WHICH REPRESENTS A SLOWDOWN COMPARED WITH THE ACHIEVED GROWTH RATE OF 11 PER CENT IN 1979.

GROSS DOMESTIC FIXED CAPITAL FORMATION

IN THE BUDGET SPEECH, SIR PHILIP FORECAST A GROWTH RATE OF INVESTMENT IN PLANT AND MACHINERY IN 1980 OF 15 PER CENT. THE REVISED FORECAST IS FOR 25 PER CENT WHICH, ALTHOUGH VERY REMARKABLE, IS STILL LOWER THAN THE ACHIEVED GROWTH RATE OF 38 PER CENT IN 1979.

THE HIGHER FORECAST IS MAINLY A REFLECTION OF A VERY RAPID GROWTH RATE OF INVESTMENT IN SUCH TRANSPORT EQUIPMENT AS AIRCRAFT, VESSELS, RAILWAY ROLLING STOCK AND VEHICLES WHILE THAT OF INVESTMENT IN INDUSTRIAL MACHINERY ALSO REMAINED FAIRLY HIGH.

SIR PHILIP STILL EXPECTED A GROWTH RATE OF 5 PER CENT, MUCH THE SAME AS THE ACHIEVED GROWTH RATE OF 4 PER CENT FOR 1979 FOR INVESTMENT IN BUILDING AND CONSTRUCTION BY THE PRIVATE SECTOR, HOWEVER FOR THE PUBLIC SECTOR (INCLUDING THE MTR CORPORATION), PERFORMANCE IN THE FIRST HALF OF 1980 APPEARS TO HAVE FALLEN SHORT OF THE BUDGET SPEECH FORECAST GROWTH RATE OF 15 PER CENT, AND A REALISTIC FORECAST OF ITS LIKELY GROWTH RATE FOR THE YEAR AS A WHOLE IS 10 PER CENT INSTEAD OF 15 PER CENT, COMPARED WITH AN ACTUAL DECREASE OF 2 PER CENT IN 1979.

THE GROWTH RATE OF TOTAL EXPENDITURE ON BUILDING AND CONSTRUCTION IS NOW THEREFORE REVISED TO 7.5 PER CENT, COMPARED WITH THE BUDGET SPEECH FORECAST OF 10 PER CENT AND AN ACHIEVED GROWTH RATE OF 1 PER CENT IN 1979.

NET EXPORT OF SERVICES

SIR PHILIP'S REVISED FORECAST FOR THE GROWTH RATE OF EXPORTS LESS IMPORTS OF SERVICES IN 1980 IS 4 PER CENT INSTEAD OF THE EARLIER FORECAST OF 9 PER CENT, WHICH IS THE SAME AS THE ACHIEVED GROWTH RATE IN 1979. THE DOWNWARD REVISION IS MAINLY THE RESULT OF AN UNEXPECTED FALL IN THE NUMBER OF TOURISTS COMING TO HONG KONG COUPLED WITH HIGHER THAN EXPECTED INCREASE IN THE NUMBER OF OVERSEAS TRIPS TAKEN BY HONG KONG RESIDENTS.

REASONS FOR REVISIONS

THE FINANCIAL SECRETARY CITED FIVE REASONS FOR THE REVISIONS IN HIS ORIGINAL FORECASTS.

FIRST, CLARY