XN000022-1982-05-26 — Page 6

WEDNESDAY, MAY 26, 1982

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HONG KONG'S ECONOMY ADJUSTING TO MAINTAIN COMPETITIVENESS

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ACCORDING TO THE FIRST QUARTER ECONOMIC REPORT 1982 PUBLISHED BY THE GOVERNMENT TODAY, THERE WAS NOT MUCH INCREASE IN ACTIVITY IN THE MANUFACTURING SECTOR IN THE FIRST QUARTER OF 1982, AND NO GROWTH WAS RECORDED IN DOMESTIC EXPORTS IN REAL TERMS IN VIEW OF THE DIFFICULTIES THE ECONOMIES OF HONG KONG'S MAIN MARKETS ARE EXPERIENCING.

THE REPORT, HOWEVER, EMPHASISES THAT THE EXPORT SECTOR APPEARS WELL POISED TO TAKE ADVANTAGE OF ANY RECOVERY IN DEMAND FROM HONG KONG'S MAIN MARKETS BECAUSE THE PRESSURE OF DOMESTIC PRICES ON MANUFACTURING COSTS HAS EASED AND THE PRICES OF HONG KONG'S MANUFACTURED PRODUCTS HAVE REMAINED STABLE IN RECENT MONTHS.

THE REPORT UPDATES THE ANALYSES OF 1981 IN THE ECONOMIC BACKGROUND DOCUMENT PUBLISHED ON BUDGET DAY, AND ASSESSES DEVELOPMENTS IN THE FIRST QUARTER OF 1982, USING SUCH STATISTICS AS ARE AVAILABLE.

IN ITS OVERALL VIEW OF THE ECONOMY, THE REPORT POINTS OUT THAT THE GROWTH RATE OF DOMESTIC DEMAND HAS SLOWED DOWN AS EVIDENCED BY THE CONTINUED DECELERATION IN THE GROWTH RATE OF RETAINED IMPORTS OF CONSUMER GOODS IN THE FIRST QUARTER. NEVERTHELESS, DOMESTIC DEMAND CONTINUED TO PROVIDE THE IMPETUS TO ECONOMIC GROWTH DURING THE FIRST QUARTER OF 1982.

AS REGARDS INFLATION, THE REPORT SUGGESTS THAT AS NO SERIOUS IMBALANCE BETWEEN THE DEMAND FOR DOMESTIC RESOURCES AND THE SUPPLY OF THEM WAS OBSERVED IN THE FIRST QUARTER, THEIR INFLUENCE ON THE RATE OF INCREASE IN PRICES MUST BE NEUTRAL. IN ADDITION, THE EASING OF INFLATION ELSEWHERE IN THE WORLD, THE STRENGTHENING OF THE EXCHANGE VALUE OF THE HONG KONG DOLLAR AND THE STABLE LOCAL INTEREST RATES ALSO CONTRIBUTED TO THE EASING OF DOMESTIC PRICES.

AS REGARDS MONEY SUPPLY, THE REPORT POINTS OUT THAT HK$M3 FELL SLIGHTLY DURING THE FIRST QUARTER OF 1982, BUT THE GROWTH RATE OF LOANS AND ADVANCES FOR USE IN HONG KONG REMAINED HIGH. THERE WAS ALSO A SUBSTANTIAL INCREASE IN FOREIGN CURRENCY DEPOSITS IN THE LAST MONTH OF THE FIRST QUARTER CONSEQUENT UPON THE ABOLITION OF THE WITHHOLDING TAX ON INTEREST ON SUCH DEPOSITS, THE REPORT, HOWEVER, CAUTIONS THAT THE STATISTICS FOR THE FIRST QUARTER SHOULD BE INTERPRETED WITH CARE BECAUSE OF THE EFFECTS OF SEASONAL FLUCTUATIONS AROUND THE LUNAR NEW YEAR AND OF THE EFFECTS OF THE RECENT STRUCTURAL CHANGES IN THE FINANCIAL SECTOR.

APART FROM GIVING AN OVERALL VIEW, THE REPORT ALSO CONTAINS INDIVIDUAL CHAPTERS ON THE EXTERNAL SECTOR, THE FINANCIAL SECTOR, THE LABOUR SECTOR, ACTIVITY IN SELECTED SECTORS AND PRICES.

/ON THE EXTERNAL