XN000022-1989-11-24 — Page 2

FRIDAY, NOVEMBER 24, 1989

ECONOMIC SITUATION IN THIRD QUARTER OF 1989, AND UPDATED FORECASTS OF GDP AND PRICES FOR 1989

THE PACE OF ECONOMIC GROWTH CONTINUED TO DECELERATE IN THE THIRD QUARTER OF 1989, DUE TO A MARKED SLOWDOWN IN BOTH EXTERNAL TRADE AND DOMESTIC DEMAND.

THE REPERCUSSIONS OF THE EVENTS IN CHINA IN EARLY JUNE REINFORCED THE CYCLICAL DOWNTURN OF THE ECONOMY.

HOWEVER, INDICATIVE OF CONTINUING CONSTRAINTS ON CAPACITY DURING THE THIRD QUARTER, THE LABOUR MARKET REMAINED GENERALLY

TIGHT. AND THE RATE OF INFLATION WAS STILL HIGH.

AN ANALYSIS OF DEVELOPMENTS IN THE THIRD QUARTER OF THIS YEAR IS GIVEN IN THE THIRD QUARTER ECONOMIC REPORT 1989 PUBLISHED TODAY (FRIDAY).

THE GOVERNMENT ECONOMIST, MR K.Y. TANG, SAID THAT ON THE BASIS OF THE MOST UP-TO-DATE INFORMATION AVAILABLE, A FURTHER REVIEW HAD BEEN MADE OF THE FORECASTS OF THE GROSS DOMESTIC PRODUCT (GDP) AND OF PRICE TRENDS FOR 1989.

THE MAIN UPDATED FORECASTS ARE : 3 PER CENT FOR THE GROWTH RATE IN REAL TERMS OF THE GDP, AND 10 PER CENT FOR THE RATES OF INCREASE IN BOTH THE GDP DEFLATOR AND THE CONSUMER PRICE INDEX (A).

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THE LATEST GDP FORECAST REFLECTS A FASTER THAN EXPECTED DECELERATION IN THE THIRD QUARTER. AS PREDICTED, THE RATE INFLATION WOULD REMAIN HIGH FOR A WHILE BEFORE IT BEGINS TO EASE.

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IN THE THIRD QUARTER OF 1989, DOMESTIC EXPORTS FELL BY ABOUT PER CENT IN REAL TERMS OVER THE SAME QUARTER IN 1988. THIS COMPARES WITH INCREASES OF 6 PER CENT IN THE FIRST QUARTER AND 2 PER CENT IN THE SECOND QUARTER.

DOMESTIC EXPORTS TO THE VARIOUS MAJOR MARKETS SHOWED A MIXED PERFORMANCE. DOMESTIC EXPORTS TO JAPAN CONTINUED TO GROW RAPIDLY, BUT DOMESTIC EXPORTS TO CHINA DECELERATED MARKEDLY. WHILE DOMESTIC EXPORTS TO THE FEDERAL REPUBLIC OF GERMANY AND THE UNITED KINGDOM CONTINUED TO DECLINE, THE FALL IN DOMESTIC EXPORTS TO THE UNITED STATES APPEARED TO HAVE STABILISED SOMEWHAT.

THE UNITED STATES REMAINED THE LARGEST MARKET FOR HONG KONG'S DOMESTIC EXPORTS. BUT ITS SHARE IN THE TOTAL VALUE FELL FROM

33 PER CENT IN 1988 TO 32 PER CENT IN THE FIRST NINE MONTHS OF 1989.

RE-EXPORTS INCREASED BY ABOUT 17 PER CENT IN REAL TERMS IN THE THIRD QUARTER OVER THE SAME QUARTER LAST YEAR, REPRESENTING A MARKED SLOWDOWN FROM THE GROWTH RATES OF 34 PER CENT IN THE FIRST QUARTER AND 25 PER CENT IN THE SECOND QUARTER.

/THE GROWTH