XN000022-1996-11-29 — Page 11

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The forecast growth rate in real terms of government consumption expenditure in 1996 is also maintained at 5%.

On investment spending, gross domestic fixed capital formation is now forecast to grow by 9.6% in real terms in 1996, slightly up from the August forecast of a 9.2% growth. Within this total, expenditure on building and construction is forecast to rise by 7.2% in real terms, down from the earlier forecast of a 9.2% increase. This is mainly attributable to a downward revision in the forecast growth rate in real terms of public sector expenditure on building and construction, from 18.5% to 13%, reflecting largely the peaking of activities on the ACP. But against this, the buoyant residential property market should lead to increased expenditure on private building projects on the one hand, and a greater demand for fitting out and interior decoration work on the other. Thus the growth rate in real terms of private sector expenditure on building and construction is revised slightly upward, to 2.5% from 2% in the earlier forecast. In line with this, the growth rate in real terms of real estate developers' margin is also raised, to 2.5% from the earlier forecast of -1%. As to expenditure on machinery and equipment, it is forecast to grow by 11% in real terms in 1996, up from the earlier forecast of a 9.8% increase. Within this total, public sector expenditure particularly for ACP-related projects is expected to remain strong. But private sector expenditure is expected to grow less rapidly, at 8.5% in real terms in 1996, after the marked increases for more than two years.

Putting the component forecasts together, the forecast growth rate in real terms of GDP in 1996 is maintained at 4.7%. This is closely in line with the growth rate attained in 1995. The rate of economic growth touched a low in the first quarter of 1996 and has been reviving since.

The CPI(A), as a common measure of consumer price inflation, is forecast to increase by an average of 6.0% in 1996, down from the 6.8% increase forecast earlier. The inflation outturn so far this year has continued to be better than expected. For the first ten months of 1996 taken together, the CPI(A) rose by an average of 5.9% over a year earlier; in August, the increase decelerated to a low of 4.9%. Present indications are that the situation is likely to remain steady for the rest of the year.

The Third Quarter Economic Report 1996 is now on sale at the Government Publications Centre on ground floor, Lower Block, Queensway Government Offices, at $30 a copy.

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