XN000022-1987-02-25 — Page 17

WEDNESDAY, FEBRUARY 25, 1987

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BUT HE SAID THAT AS A RESULT OF THE DEPRECIATION OF THE HONG KONG DOLLAR, IMPORT PRICES OF CONSUMER GOODS MAD SHOWN MORE RAPID INCREASES SINCE THE SECOND QUARTER OF 1986 AND THIS, COUPLED WITH FIRMER DOMESTIC DEMAND, WOULD LIKELY RESULT IN SOME INCREASED INFLATION.

MR JACOBS SAID HE EXPECTED THE GROWTH RATE OF THE GDP THIS YEAR TO BE LOWER THAN THAT OF LAST YEAR. THE GROWTH RATE OF DOMESTIC EXPORTS WAS LIKELY TO SLOW DOWN, WHILE THAT OF DOMESTIC DEMAND WAS EXPECTED TO INCREASE.

+ECONOMIC GROWTH IN OUR MAJOR OVERSEAS MARKETS INCLUDING THE UNITED STATES, IS EXPECTED TO BE SLIGHTLY FASTER THAN LASŤ YEAR. BUT THE QUOTA RESTRAINT LIMITS PARTICULARLY FOR THE UNITED STATES MARKET WILL PROBABLY CONSTRAIN EXPORT PERFORMANCE.

+MOREOVER, IF THE RATE OF DEPRECIATION OF THE U.S. DOLLAR MODERATES IN 1907, AS SEEMS LIKELY, THE GAIN IN THE PRICE COMPETITIVENESS OF OUR EXPORTS MAY BE LESS THAN IN 1986,+ HE

SAID.

REFERRING TO HONG KONG'S TRADE WITH CHINA, MR JACOBS SAID THIS HAD BEEN AFFECTED BY MEASURES ADOPTED TO RESTRICT IMPORTS AND TO CONTROL THE USE OF FOREIGN EXCHANGE RESERVES. WHILE CHINA WOULD NEED TO IMPORT IN ORDER TO IMPLEMENT ITS MODERNISATION PROGRAMMES, SOME CONTROL MEASURES SEEMED LIKELY TO CONTINUE.

NOTING THAT PROSPECTS FOR DOMESTIC EXPORTS WOULD CONTINUE TO BE AFFECTED BY EVENTS OUTSIDE HONG KONG'S CONTROL, MR JACOBS SAID HE EXPECTED THAT DOMESTIC EXPORTS IN 1987 WOULD GROW BY ABOUT 7 PER CENT, AND RE-EXPORTS BY ABOUT 13 PER CENT. THIS WOULD GIVE A FORECAST GROWTH RATE OF SLIGHTLY LESS THAN 10 PER CENT FOR TOTAL EXPORTS, COMPARED WITH A GROWTH RATE FOR 1986 OF ABOUT 15 PER CENT.

ON PRIVATE CONSUMPTION EXPENDITURE, THE FINANCIAL SECRETARY FORECAST IT WOULD GROW BY 7 PER CENT, AND THAT OF GOVERNMENT BY 6 PER CENT.

CAPITAL INVESTMENT WAS EXPECTED TO GROW BY JUST OVER 9 PER CENT, WITH ROUGHLY THE SAME GROWTH RATES FOR BOTH THE PRIVATE AND THE PUBLIC SECTORS. CONSISTENT WITH THESE FORECASTS, THE GROWTH RATE OF IMPORTS FOR 1987 WAS LIKELY TO BE 11 PER CENT; AND THE VISIBLE TRADE DEFICIT WAS EXPECTED TO BE ABOUT $8 BILLION.

+COMBINING THE FORECAST GROWTH RATES OF THE VARIOUS COMPONENTS OF EXPENDITURE GIVES A FORECAST GROWTH RATE OF GDP FOR 1907 OF JUST OVER 6 PER CENT,+ HE SAID.

MR JACOBS