TNAG-0453-FCO40-518-Budget-of-Hong-Kong-1974-1975-1975 — Page 44

HONG KONG: ECONOMY 1973-74

Commentary

The year saw buoyant growth (GDP up by a real 9%).

Since the labour market was slack, this seems to have been based on

Private consumption may higher productivity (= increased investment). have stagnated, and in the latter part of the year real wages were

even

falling.

Inflated import prices, particularly for food, quickly worked through as an 18% rise (average 1973 against average 1972) in the

These latter did not however consumer index and higher export prices. prevent the volume of goods exported increasing by 7%.

trade deficit rose, but not seriously.

The structural

Haddon-Cave has claimed to expect 4% real growth in GDP this

on imports of which Hong Kong is

almost completely dependent. Is his basic assumption that price- inflation in 1974 will not differ greatly from last year's justified? Consumer prices in Q1 1974 were rising rather faster.

year despite question marks over oil

Electricity

tariffs for bulk consumers had already been doubled by end-February whe Haddon-Cave was speaking. On the other hand there is talk (albeit imprecise) of increased under-employment and of sluggishness in the

economy.

Further outlook: stagflation?

In January-April (1974 against 1973) exports rose as fast as

This sounds promising on the face of it. imports (both by 41-42%).

this

or less commensurate rise in the trade But of course it implies a more deficit. On various crude extrapolations for 1974 as a whole, could leave an extra HK$1-2 md. to be found from invisibles, investment receipts or borrowing.

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$