XN000022-1983-05-05 — Page 2

THURSDAY, MAY 5, 1983

HK ECONOMY POISED TO RECOVER

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THE HONG KONG ECONOMY IS WELL POISED TO RECOVER, IF IT IS NOT ALREADY ON THE WAY TO A RECOVERY, THE SECRETARY FOR MONETARY AFFAIRS, MR DOUGLAS BLYE, SAID TODAY (THURSDAY).

SPEAKING AT THE 16TH ANNUAL MEETING OF THE BOARD OF COVERNORS OF THE ASIAN DEVELOPMENT BANK IN MANILA, MR BLYE SAID EXPORT ORDERS HAD SHOWN SIGNS OF PICKING UP AND THERE WAS A REVIVAL OF CONFIDENCE AMONG MANUFACTURERS.

+IT IS VERY ENCOURAGING THAT EXPORTS TO THE UNITED STATES, HONG KONG'S LARGEST MARKET, WERE IN REAL TERMS ABOUT NINE PER CENT HIGHER IN THE FIRST QUARTER OF THIS YEAR, COMPARED WITH THE FIRST QUARTER OF 1982.

+THE SHARP DOWNWARD ADJUSTMENT SEEN RECENTLY IN PROPERTY AND LAND PRICES WHICH, AMONG OTHER THINGS, HAS CREATED DIFFICULTIES FOR A HANDFUL OF DEPOSIT-TAKING COMPANIES APPEARS TO HAVE STABILISED.

+AND DESPITE EVENTS CONNECTED WITH THESE COMPANIES, HONG KONG HAS CONTINUED TO EXPAND AS AN INTERNATIONAL FINANCIAL CENTRE, HE SAID.

+

ON THE RECENT PERFORMANCE OF THE HONG KONG DOLLAR MR BLYE SAID PART OF THE WEAKNESS IN ITS EXCHANGE RATE RESULTED FROM HIGHER LEVELS OF IMPORTS OF RAW MATERIALS.

+AS THESE ARE CONVERTED INTO GOODS FOR EXPORTS, THE FLOW OF FOREIGN CURRENCY EARNINGS WILL INCREASE AND THIS WILL HAVE A FAVOURABLE EFFECT ON THE EXCHANGE RATE.+

HOWEVER, MR BLYE SAID A MODERATE DEGREE OF GOVERNMENT BORROWING MIGHT BE NECESSARY IF THE PRESENT DIFFICULTIES IN OUR PUBLIC FINANCES LOOKED LIKE CONTINUING BEYOND 1983-84 ON ANY SUBSTANTIAL SCALE.

THIS WAS BECAUSE IT WOULD NOT BE PRUDENT TO CONTINUE TO DRAW DOWN HONG KONG'S RESERVES AT A RATE OF OVER $3 BILLION A YEAR TO COVER ANY DEFICIT IN THE GOVERNMENT'S ACCOUNTS, HE SAID.

IN DRAWING DOWN THE RESERVES TO MEET THE EXPECTED DEFICITS FOR THE FINANCIAL YEARS 1982-83 AND 1983-84, HONG KONG'S FREE FISCAL RESERVES (AFTER PROVIDING FOR CONTINGENCIES) WOULD BE REDUCED TO ABOUT $8.6 BILLION AT THE END OF MARCH 1984, HE SAID. MR BLYE SAID THAT IN CONSIDERING WHETHER TO BORROW, THE GOVERNMENT WOULD, HOWEVER, BE CONSTRAINED BY ITS SELF-IMPOSED BUDGETARY GUIDELINES, WHICH REQUIRED IT ALWAYS TO MAINTAIN A CONSIDERABLE SURPLUS ON RECURRENT ACCOUNT FOR THE PURPOSE OF FINANCING A SUBSTANTIAL PROPORTION OF EXPENDITURE ON THE CAPITAL ACCOUNT.

+WE SHALL FURTHER ENSURE THAT BORROWING WILL BE VIGOROUSLY CONTROLLED AND IN ANY CASE ONLY BE FOR THE PURPOSE OF PRODUCTIVE CAPITAL INVESTMENT.+

/NOTING THAT

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