XN000022-1986-02-26 — Page 37

WEDNESDAY, FEBRUARY 26, 1986

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4.5 PER CENT GDP GROWTH SEEN FOR '86

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PRESENT FACTORS INDICATE THAT THE GROSS DOMESTIC PRODUCT (GDP) WILL GROW AT A RATE OF ABOUT 4.5 PER CENT IN 1986, THE FINANCIAL SECRETARY, SIR JOHN BREMRIDGE, SAID IN HIS BUDGET SPEECH.

EXPLAINING THE REASONS FOR AN IMPROVEMENT IN THE GROWTH RATE OF THE GDP, SIR JOHN SAID THE DOMESTIC EXPORT SECTOR SHOULD BENEFIT FROM THE EXPECTED IMPROVED GROWTH IN MOST MAJOR ECONOMIES. IN PARTICULAR, THE GROWTH RATES OF SEVERAL MAJOR MARKETS INCLUDING THE UNITED STATES AND WEST GERMANY, WERE EXPECTED TO ACCELERATE. MOREOVER, THE TRADE-WEIGHTED DEPRECIATION OF THE HONG KONG DOLLAR IN THE LATTER PART OF 1985 WOULD HELP TO ENHANCE THE PRICE COMPETITIVENESS OF OUR DOMESTIC EXPORTS IN WORLD MARKETS.

BUT PROTECTIONISM REMAINED A CONSTANT THREAT, AND THE FORTHCOMING NEGOTIATIONS ON THE MULTI-FIBRE ARRANGEMENT WERE GOING TO BE TOUGH. EVEN THE UNCERTAINTY CREATED BY THE THREAT OF GROWING PROTECTIONISM HAD SOME ADVERSE EFFECT ON DOMESTIC EXPORT PERFORMANCE.

SIR JOHN SAID: +CHINA IS NOW HONG KONG'S SECOND LARGEST DOMESTIC EXPORT MARKET. THE UNDERSTANDABLE MEASURES ADOPTED BY CHINA IN EARLY 1985 TO RESTRICT IMPORTS AND TO CONTROL THE USE OF FOREIGN EXCHANGE RESERVES HAVE NEVERTHELESS RESULTED IN A SLOWING DOWN IN THE GROWTH RATES OF HONG KONG'S DOMESTIC EXPORTS AND RE-EXPORTS TO CHINA, THESE MEASURES ARE LIKELY TO PERSIST THROUGHOUT 1986.+

SIR JOHN SAID THAT, AS ALWAYS, THE FORECAST OF DOMESTIC EXPORTS WAS THE MOST CRUCIAL PART OF THE WHOLE FORECASTING EXERCISE, IT WAS ALSO THE MOST DIFFICULT BECAUSE OF THE IMPACT OF FACTORS WHICH WERE SIMULTANEOUSLY OUTSIDE OUR CONTROL AND DIFFICULT TO PREDICT.

+WITH THIS WARNING, THE FORECAST OF THE GROWTH RATE OF DOMESTIC EXPORTS IN 1986 IS 7.5 PER CENT, A MARKED IMPROVEMENT COMPARED WITH THE DECLINE IN 1985. THIS FORECAST, COMBINED WITH AN EXPECTED GROWTH RATE OF RE-EXPORTS OF FOUR PER CENT GIVES A FORECAST FOR TOTAL EXPORTS OF SIX PER CENT, ABOUT THE SAME AS IN 1985. SUCH AN OVERALL GROWTH RATE OF EXPORTS IS MODEST BY HONG KONG STANDARDS BUT THE SHIFT IN FAVOUR OF DOMESTIC EXPORTS IMPLIES A GREATER INCREASE IN DOMESTIC VALUE- ADDED CONTENT.+

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