XN000022-1981-10-07 — Page 6

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WEDNESDAY, OCTOBER 7, 1981

HE SAID TOTAL EXPENDITURE FOR THE YEAR WAS NOW EXPECTED TO EXCEED THE ESTIMATE BY NEARLY 10 PER CENT, MAINLY BECAUSE OF SUBSTANTIAL INCREASES IN SALARIES, INCREASED SPENDING ON PUBLIC WORKS, AND THE DESALTER.

+AT PRESENT WE CAN EASILY MEET THE INCREASED EXPENDITURE AND STILL ACHIEVE A LARGER BUDGET SURPLUS, AND CLEARLY PURELY BUDGETARY RESTRAINTS ARE NOT A PROBLEM, THE GOVERNOR SAID.

SIR MURRAY, HOWEVER, POINTED OUT THAT IN THE CURRENT INFLATIONARY SITUATION THERE WERE MACRO-ECONOMIC RESTRAINTS ON EXPENDITURE THAT COULD NOT BE IGNORED IF HONG KONG GOODS WERE TO REMAIN COMPETITIVE AND HONG KONG CURRENCY REMAIN STABLE,

WHAT THE GOVERNMENT COULD DO MIGHT BE LIMITED IN COMPARISON TO THE MORE MASSIVE EFFECT OF THE PRIVATE SECTOR ON CREDIT CREATION AND CONSEQUENTLY ON TOTAL FINAL DEMAND- BUT IT WAS STILL IMPORTANT THAT GOVERNMENT EXPENDITURE SHOULD NOT FALL TOO FAR OUT OF STEP WITH THE GROWTH OF THE ECONOMY, HE ADDED.

+THIS WE WILL WATCH, HE SAID,

EXPORTS HOLDING UP WELL ****

HONG KONG'S DOMESTIC EXPORTS ARE HOLDING UP REMARKABLY WELL DESPITE ADVERSE CONDITIONS ABROAD AND WE CAN EXPECT AN INCREASE OF ABOUT SEVEN PER CENT IN REAL TERMS OVER LAST YEAR, THE GOVERNOR, SIR MURRAY MACLEHOSE, SAID TODAY (WEDNESDAY).

+

SIR MURRAY, WHO WAS REVIEWING HONG KONG'S ECONOMY IN HIS OPENING SPEECH AT THE LEGISLATIVE COUNCIL, ALSO SAID THAT THE GROWTH RATE OF DOMESTIC DEMAND NOW SHOWED SIGNS OF SLOWING DOWN.

HE SUMMED UP THE 1981 DEVELOPMENTS IN THE ECONOMY AS, TO SOME EXTENT, A CONTINUATION OF THE TRENDS OF THE SECOND HALF OF 1980.

IN THE FIRST SIX MONTHS, HE SAID, THE GROWTH RATE OF DOMESTIC DEMAND CONTINUED TO BE RAPID AND SO THE RELATIVE SHIFT FROM DOMESTIC EXPORTS TO DOMESTIC DEMAND AS THE MAIN IMPETUS TO ECONOMIC GROWTH WAS MAINTAINED.

SIR MURRAY SAID THAT ALTHOUGH HONG KONG CAN EXPECT THE GDP TO GROW BY TEN PER CENT IN REAL TERMS SUCH GROWTH WAS STILL BEING LED BY DOMESTIC DEMAND.

RE-EXPORTS, HE SAID, HAD CONTINUED TO GROW RAPIDLY IN 1981 So THAT TOTAL EXPORTS WOULD PROBABLY SHOW AN INCREASE OF ABOUT 15 PER CENT OVER 1980 IN REAL TERMS.

+NEVERTHELESS, + SIR MURRAY SAID, THE GROWTH RATE OF TOTAL IMPORTS IN VALUE TERMS IN 1981 SO FAR HAS BEEN SOMEWHAT FASTER THAN THAT OF TOTAL EXPORTS.

/+BUT IN