XN000022-1995-07-26 — Page 50

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Growth rate and investment in new airport

Following is a question by Dr the Hon Huang Chen-ya and a written reply by the Secretary for Financial Services, Mr Michael Cartland, in the Legislative Council today (Wednesday):

Question:

According to the economic forecasts released by the Government on 26 May 1995, the growth rate in real terms of the Gross Domestic Product (GDP) this year is estimated to stand at 5.5 per cent. In this connection, will the Government inform this Council:

(a)

(b)

of the forecast growth rate for 1995 after discounting the 80 per cent growth rate of expenditure on machinery and equipment in the public sector; and

what percentage the government investment in the new airport project is estimated to represent in the GDP of 1995?

Reply:

(a)

Public sector expenditure on machinery and equipment accounted for only a very small proportion of the GDP. In 1994, this proportion was 0.4 per cent. This component of expenditure is forecast to rise by 80 per cent in real terms in 1995, due to envisaged substantial purchases of capital goods for Government operations and for the infrastructural projects. Coupling these two figures, the direct contribution to GDP growth rate in 1995 brought about by the forecast growth in this particular component is reckoned to be around 0.3 of a percentage point.

On the face of it, if the growth in this component were completely discounted, the forecast GDP growth rate for 1995 would become around 5.2 per cent. However, there is a further factor involved. A predominant part of the machinery and equipment bought by the Government is known to be imported. Hence, if the growth in this component were to be discounted, the corresponding imports would have to be discounted as well. The net result, after taking into account the import factor, would be that the end effect on the forecast GDP growth rate should be much smaller than 0.3 of a percentage point, possibly virtually nil.

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