XN000022-1996-11-29 — Page 10

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Exports of goods are expected to show a better performance in the fourth quarter. The US dollar, though still relatively strong, has tended to stabilise in recent months. This should help to relieve the earlier and stronger adverse exchange rate effect on Hong Kong's export competitiveness in the world market. Import demand in the United States also shows signs of revival most recently, as the inventory adjustment since the early part of this year is probably nearing completion. Strong consumer demand in China, coupled with the pick-up in its exports lately, should underpin its import demand for both domestic consumption and export production. As to the other major markets, sustained economic growth in the United Kingdom as well as economic recovery and trade liberalisation in Japan should continue to lend support to import demand in these two countries.

The forecast growth rate in real terms of imports of goods in 1996 is also revised further down to 4.5%, from 5.7% in the August update. Underlying this revision is the slower growth in re-exports and the decline in retained imports in the first nine months of this year. Conceivably, the decrease in retained imports is largely a consequence of the inventory adjustment process that has been going on since the latter part of last year. With inventory accumulation in the economy returning to a more normal level, some pick-up in retained imports is expected for the fourth quarter of this year.

With the slower growth in exports matched by an even faster deceleration in growth of imports, the visible trade deficit should narrow further thereby keeping a positive net effect on overall GDP growth.

The forecast growth rate in real terms of exports of services in 1996 is likewise revised down, from 10% to 7%, mostly as a result of the more moderate growth in trade-related services. Exports of financial and other professional and business services should nevertheless continue to grow at a healthy pace. Moreover, the sustained surge in tourism should also render a key impetus to growth in overall exports of services. Affected by the moderation in trade-related services, the forecast growth rate in real terms of imports of services in 1996 is concurrently revised down. from 6% to 3%.

In the domestic sector, the forecast growth rate in real terms of private consumption expenditure in 1996 is maintained at 4%. The economic environment in relation to consumption has clearly turned more favourable in recent months. Better employment opportunities along with a lower unemployment rate, generally rising earnings in real terms, subsiding consumer price inflation, stable interest rates, and strong economic confidence as evidenced by buoyancy in both the stock and the property markets should all contribute to a continued revival in consumption demand in the next few months.

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