XN000022-1982-02-24 — Page 27

WEDNESDAY, FEBRUARY 24, 1982

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+THE GROWTH RATE OF RETAINED IMPORTS IN 1981 WAS ONLY ABOUT SEVEN PER CENT. AFTER ALLOWING FOR RE-EXPORTS THE GROWTH RATE OF TOTAL EXPORTS AT 13 PER CENT WAS HIGHER THAN THE GROWTH RATE OF

IMPORTS AT 12 PER CENT AND THE VISIBLE TRADE GAP IN 1981 OF 11.7 PER CENT WAS SLIGHTLY LOWER THAN THAT IN 1980 AT 12 PER CENT.+

THIS OVERALL SITUATION THUS COMPARED REASONABLY WELL WITH THAT IN 1980, MR BREMRIDGE POINTED OUT.

HE ALSO SAID THAT DURING THE COURSE OF THE YEAR THERE WAS ALSO A CLEAR TENDENCY FOR THE IMPETUS TO ECONOMIC GROWTH TO SHIFT BACK TO DOMESTIC EXPORTS.

THE YEAR-ON-YEAR GROWTH RATE OF DOMESTIC EXPORTS ACCELERATED FROM RATHER LESS THAN SIX PER CENT IN REAL TERMS IN THE FIRST HALF OF THE YEAR TO ABOUT 10 PER CENT IN THE SECOND HALF, WHILE THE GROWTH RATE OF CONSUMER DEMAND SLOWED DOWN SHARPLY AS INDICATED BY THE MARKED FALL IN THE GROWTH RATE OF RETAINED IMPORTS OF CONSUMER GOODS.

REFLECTING THIS DEVELOPMENT, UP UNTIL ABOUT AUGUST THE VISIBLE TRADE GAP WAS ON A WIDENING TREND AND CONCERN WAS GROWING ABOUT THE OVERALL DOMESTIC ECONOMIC SITUATION IN THE FACE OF RECESSION IN OUR MAJOR MARKETS AND THE PERSISTENTLY HIGH INFLATION RATE, WHICH AFFECTED ATTITUDES ADVERSELY AND NOT LEAST IN THE FOREIGN EXCHANGE MARKET.

IN CONSEQUENCE THE HONG KONG DOLLAR DEPRECIATED SHARPLY DURING THE THIRD QUARTER THE TRADE WEIGHTED EXCHANGE RATE INDEX DROPPED FROM 90.7 ON JUNE 5, THE HIGHEST POINT FOR THE YEAR, TO 81.1 BY SEPTEMBER 23, THE LOWEST POINT FOR THE YEAR. AGAINST THE U.S. DOLLAR THE HONG KONG DOLLAR DEPRECIATED BY 20 PER CENT OVER THE FIRST NINE MONTHS OF THE YEAR.

+BUT AS THE INTEREST RATE DIFFERENTIAL MOVED IN FAVOUR OF THE HONG KONG DOLLAR IN EARLY OCTOBER AND AS THE VISIBLE TRADE GAP NARROWED IN RESPONSE TO A SLOWING DOWN IN THE GROWTH RATE OF IMPORTS, THE EXCHANGE RATE RECOVERED, HE SAID.

THE NET DEPRECIATION IN THE YEAR AGAINST THE US DOLLAR WAS 10.7 PER CENT. IN TERMS OF THE TRADE-WEIGHTED EXCHANGE RATE INDEX THE DEPRECIATION WAS ONLY 2.6 PER CENT.

MR BREMRIDGE SAID THESE WIDE FLUCTUATIONS IN THE EXCHANGE RATE INTER ALIA INEVITABLY AFFECTED DOMESTIC PRICES.

HE SAID ALTHOUGH THE PROPERTY AND LAND MARKETS, WHICH WERE CHARACTERISED GENERALLY BY FALLING PRICES, WERE NO LONGER STIMULATING PRICES GENERALLY, THE RATE OF INFLATION AS MEASURED BY THE CONSUMER PRICE INDICES REMAINED HIGH AT 15 PER CENT.

+BUT REFLECTING AN ECONOMY ADJUSTING AUTOMATICALLY THROUGH THE MARKET MECHANISM IN FAVOUR OF EXPORT COMPETITIVENESS, THE RATE OF INCREASE IN THE GDP DEFLATOR WAS LESS AT 10 PER CENT, A CONSIDERABLY SLOWING DOWN ON THE INCREASE IN 1980 OF 13 PER CENT.+

/ANOTHER FACTOR