XN000022-1989-03-01 — Page 8

N

WEDNESDAY, MARCH 1, 1989

MR JACOBS SAID THIS BROUGHT HIM TO THE HAD MENTIONED THE NEED TO PROVIDE FOR EXPENSIVE INFRASTRUCTURAL DEVELOPMENTS.

— —

A

THIRD FACTOR THAT HE NUMBER OF LARGE AND

"THE DILEMMA, ог COURSE, IS THAT RAPIDLY INCREASING EXPENDITURE ON CAPITAL WORKS RUNS COUNTER то MY CONCLUSION ON EXPENDITURE GENERALLY, BUT WE SIMPLY CANNOT AFFORD TO DELAY UNDULY THE UPGRADING OF OUR INFRASTRUCTURAL FRAMEWORK IF HONG KONG'S ECONOMY IS TO CONTINUE TO DEVELOP IN THE YEARS AHEAD.

"THESE, THEN, ARE THE MAJOR CONFLICTING PRESSURES THAT I HAVE HAD TO RECONCILE IN THE FORMULATION OF THE BUDGET FOR 1989-90. THE TASK HAS BEEN COMPLEX AND THE SOLUTIONS I HAVE ADOPTED INEVITABLY REPRESENT A COMPROMISE.

"I REMAIN ACUTELY AWARE OF THE NEED FOR STABILITY AND CONTINUITY IN THE MANAGEMENT OF OUR PUBLIC FINANCES, HE SAID.

**

DESCRIBING THE PERFORMANCE OF THE ECONOMY, MR JACOBS SAID THE ECONOMY SLOWED DOWN TO A MORE MODERATE PACE LAST YEAR, BUT THIS COULD BE ATTRIBUTED MAINLY TO SUPPLY-SIDE CONSTRAINTS.

"FOLLOWING TWO CONSECUTIVE YEARS OF DOUBLE-DIGIT GROWTH, THE ECONOMY SLOWED DOWN TO A MORE MODERATE PACK LAST YEAR. IT IS ESTIMATED THAT OUR GROSS DOMESTIC PRODUCT GREW BY ABOUT 7.5 PER CENT IN REAL TERMS IN 1988. THIS COMPARES WITH ABOUT 14 PER CENT IN 1987."

HE SAID THE ECONOMY HAD ESCAPED LARGELY UNSCATHED FROM THE STOCK MARKET CRASH IN OCTOBER 1987. AND BUSINESS CONFIDENCE HAD GENERALLY RETURNED BY EARLY 1988. THE SLOW-DOWN IN ECONOMIC GROWTH COULD THUS BE ATTRIBUTED MAINLY TO SUPPLY-SIDE CONSTRAINTS.

"THE LABOUR MARKET REMAINED TIGHT, WITH THE UNEMPLOYMENT RATE FALLING TO A RECORD LOW OF 1.3 PER CENT IN THE FOURTH QUARTER OF THE YEAR. AS THE ECONOMY CONTINUED TO OPERATE VIRTUALLY AT FULL CAPACITY, KEEN COMPETITION FOR RESOURCES DROVE UP COSTS," HE SAID.

IN OVERALL TERMS, MR JACOBS SAID, THE EXTERNAL SECTOR PERFORMED REMARKABLY WELL.

"THE SINGLE MOST NOTEWORTHY FEATURE HAS DEEN THE DEVELOPMENT OF OUR RE-EXPORT TRADE, AND IN 1988, RE-EXPORTS OVERTOOK DOMESTIC EXPORTS. OUR ROLE AS AN ENTREPOT SERVING CHINA AND THE ASIA-PACIFIC REGION HAS AGAIN BECOME OF MAJOR SIGNIFICANCE, HE SAID.

"

AS REGARDS DOMESTIC EXPORTS, SUBSTANTIAL INCREASES WERE ATTAINED IN CHINA, THE UNITED KINGDOM AND JAPAN ALTHOUGH THERE WAS A DECLINE IN RESPECT OF THE UNITED STATES MARKET.

"WE ARE THUS WITNESSING THE CONTINUATION OF A USEFUL DIVERSIFICATION OF OUR MARKETS. IMPORTS ALSO ROSE RAPIDLY, WITH THE! RESULT THAT OUR VISIBLE TRADE ACCOUNT SHOWED A YEAR THAN IN 1987. HE SAID,

"

LARGER DEFICIT LAST

/MR JACOBS .....................