XN000022-1994-08-26 — Page 10

FRIDAY, AUGUST 26, 1994

IMPORTS ARE FORECAST TO GROW BY 12.5% IN REAL TERMS IN 1994, HAVING CONSIDERED THE SLOWER-THAN-EXPECTED GROWTH IN RE-EXPORTS SO FAR BUT ALSO THE OFFSET FROM THE MARKED REVIVAL IN RETAINED IMPORTS IN RECENT MONTHS. LOOKING AHEAD, THE DEMAND FOR IMPORTS SHOULD CONTINUE TO RISE, WITH THE INCREASE PROBABLY CONCENTRATED MORE IN CONSUMBR

GOODS AND CAPITAL GOODS.

THE GROWTH RATES IN REAL TERMS OF EXPORTS AND IMPORTS OF SERVICES IN 1994, FORECAST AT 9% AND 8% RESPECTIVELY, HAVE TAKEN INTO ACCOUNT THE CONTINUED GROWTH IN TRADE-RELATED SERVICES AND A LIKELY PICK-UP IN TOURISM DURING THE REST OF THE YEAR. EXPORTS OF VARIOUS OTHER PROFESSIONAL AND SUPPORT SERVICES SHOULD MAINTAIN THEIR GROWTH MOMENTUM, IN LINE WITH THE DEVELOPMENT OF HONG KONG A9 A SERVICE- ORIENTED ECONOMY.

IN THE DOMESTIC SECTOR, THE FORECAST GROWTH RATE IN REAL TERMS OF PRIVATE CONSUMPTION EXPENDITURE IN 1994 IS KEPT AT 7%, AND THAT OF GOVERNMENT CONSUMPTION EXPENDITURE AT 4.4%. THERE MAY WELL BK SOME ASSET MARKET EFFECT DAMPENING CONSUMER SPENDING, GIVING A LESS RAPID INCREASE IN THE SECOND HALF OF THE YEAR THAN IN THE FIRST HALF. BUT CONTINUED FULL EMPLOYMENT AND RISING REAL INCOMES SHOULD STILL BE ABLE TO UNDERPIN GROWTH.

AS TO INVESTMENT, PUBLIC SECTOR EXPENDITURE ON BUILDING AND CONSTRUCTION IN 1994 IS FORECAST TO GROW BY 30% IN REAL TERMS, MAINLY IN THE LIGHT OF VERY INTENSIVE WORK ON A NUMBER OF MAJOR PUBLIC SECTOR INFRASTRUCTURAL PROJECTS. IN THE PRIVATE SECTOR, A NUMBER OF LARGE CIVIL ENGINEERING PROJECTS ARE EXPECTED TO GATHER MOMENTUM, MOREOVER, WORK ON SOME BUILDING PROJECTS HAS ALSO PICKED UP SOMEWHAT. HAVING REGARD ΤΟ THESE TRENDS, PRIVATE SECTOR EXPENDITURE ON BUILDING AND CONSTRUCTION IN 1994 IS FORECAST TO RISE BY 5% IN REAL TERMS. TAKEN TOGETHER, OVERALL EXPENDITURE ON BUILDING AND CONSTRUCTION IS FORECAST TO BE 15.2% HIGHER IN REAL TERMS IN 1994. ON INVESTMENT IN MACHINERY AND EQUIPMENT, THE FORECAST GROWTH RATE IN REAL TERMS OF THE OVERALL EXPENDITURE IN 1994 IS KEPT AT 5.8%. COMBINING ALL RELEVANT COMPONENTS, GROSS DOMESTIC FIXED CAPITAL FORMATION IN 1994 IS EXPECTED TO SHOW A 7.8% GROWTH IN REAL TERMS.

OVERALL, THE GROWTH RATE IN REAL TERMS OF THE GDP IN 1994, INCORPORATING THE RESULTS OF THE NON-ROUTINE REVISION OF THE GDP ESTIMATES, IS FORECAST AT 5.7%. OF ITS COMPONENTS, THE GROWTH IN RE- EXPORTS BEING LESS RAPID THAN EARLIER EXPECTED IS OFFSET PRINCIPALLY BY THE MUCH STRONGER GROWTH MOMENTUM IN FIXED ASSET INVESTMENT SPECIFICALLY IN INFRASTRUCTURE CONSTRUCTION. IN OVERALL TERMS, THE

ECONOMY IS EXPECTED TO GROW AT A STEADY PACE THROUGHOUT THE YEAR.

ON INFLATION, THE FORECAST RATES OF INCREASE IN BOTH THE CPI(A) AND THE GDP DEFLATOR ARE KEPT UNCHANGED AT 8.5% AND 8% RESPECTIVELY. NOTWITHSTANDING THE FAVOURABLE OUTCOME IN THE FIRST HALF OF THE

YEAR. CONSUMER PRICE INFLATION IN JULY SHOWED A RELAPSE AS THE PRICES OF VEGETABLES WERE PUSHED UP SHARPLY FOLLOWING THE FLOODING IN CHINA.

VEGETABLE PRICES ARE LIKELY ΤΟ REMAIN HIGH UNTIL NORMAL AGRICULTURAL PRODUCTION IS RESUMED.

/MORE GENERALLY,

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