XN000022-1989-08-25 — Page 6

UN

FRIDAY, AUGUST 25, 1989

TO ΤΟ

MOREOVER, THE STRENGTHENING OF THE U.S. DOLLAR IN MAY AND JUNE, COUPLED WITH A HIGHER RATE OF DOMESTIC INFLATION, WILL TEND RESTRAIN THE PRICE COMPETITIVENESS OF HONG KONG'S PRODUCTS LEADING SLOWER GROWTH IN DOMESTIC EXPORTS IN THE LATTER PART OF THE YEAR.

A SLOW-DOWN IN OVERSEAS DEMAND COULD ALSO LEAD ΤΟ REDUCED GROWTH IN THAT PART OF HONG KONG'S EXPORTS ΤΟ CHINA WHICH ARE ASSOCIATED WITH OUTWARD PROCESSING ACTIVITIES.

RE-EXPORT TRADE IS LIKELY TO REMAIN ROBUST, ALTHOUGH ITS GROWTH RATE IS NOT AS HIGH AS IN THE EARLY PART OF THIS YEAR AND IS EXPECTED TO DECELERATE FURTHER.

MUCH WILL DEPEND ON CHINA BOTH AS A MAJOR SOURCE AND AS A MAJOR OUTLET FOR HONG KONG'S RE-EXPORTS.

THE EXPECTED SLOW-DOWN IN THE GROWTH RATES OF EXPORTS AND IMPORTS OF SERVICES IS, IN PART. A REFLECTION OF MORE MODERATE DEMAND FOR TRADE-RELATED SERVICES AS WELL AS A SLACKENING IN TOURIST SPENDING.

ΤΟ

IN THE DOMESTIC SECTOR, THE FORECAST GROWTH RATE IN REAL TERMS OF PRIVATE CONSUMPTION EXPENDITURE WAS LOWERED FROM SEVEN PER CENT 5.5 PER CENT.

THIS IS IN LINE WITH THE EXPECTED SLOW-DOWN IN OVERALL ECONOMIC GROWTH. GOVERNMENT CONSUMPTION EXPENDITURE WAS, HOWEVER, FORECAST TO GROW FASTER, AT SIX PER CENT INSTEAD OF 4.6 PER CENT, PARTLY BECAUSE OF A LARGER ACTUAL EXPENDITURE IN RECENT MONTHS.

GROWTH

AS REGARDS GROSS DOMESTIC, FIXED CAPITAL FORMATION, THE FORECAST RATE WAS REDUCED FROM AROUND SIX PER CENT TO 4.5 PER CENT.

WHILE THE FORECAST GROWTH RATES OF EXPENDITURES ON BUILDING AND CONSTRUCTION AND ON PLANT AND EQUIPMENT WERE LITTLE CHANGED. THERE WAS A SIGNIFICANT CUT-BACK IN REAL ESTATE DEVELOPERS' MARGIN.

OVERALL, BECAUSE THE FORECAST GROWTH RATE OF PUBLIC SECTOR EXPENDITURE WAS RAISED WHILE THAT OF PRIVATE SECTOR EXPENDITURE WAS REDUCED. PUBLIC SECTOR EXPENDITURE SHOULD PROVIDE A RELATIVELY GREATER IMPETUS THAN WAS ENVISAGED EARLIER IN INCREASING DOMESTIC DEMAND.

THE CURRENT INFLATIONARY PRESSURES ARE STILL STRONG. INASMUCH AS THEY ARE LARGELY DOMESTICALLY GENERATED THEY SHOULD BASE GRADUALLY AS THE GROWTH RATE OF THE ECONOMY CONTINUES TO SLOW.

HOWEVER, UP TO JUNE THE RATE OF CONSUMER PRICE INFLATION HAD BEEN ACCELERATING.

TOO

A SLOWER INCREASE IN THE CPI WAS RECORDED IN JULY. BUT EARLY TO DETERMINE ANY SIGNIFICANT DOWNTREND.

IT IS

/HAVING REGARD