TNAG-1456-FCO40-1980-Future-of-Hong-Kong-annual-report-to-Parliament-on-Hong-Kong-1986 — Page 58

VIII.

RESTRICTED

PERFORMANCE OF THE ECONOMY

(a) - General Situation

42.

Led by a strong recovery in domestic

in domestic exports since March,

1986 saw a marked

marked upturn in the Hong Kong economy. Domestic exports grew by 13% in real

real terms, in the first nine months of 1986, over

the same period last year, in contrast with a decline of 5% in 1985

as a whole. This recovery was attributable partly to improved

demand for Hong Kong's products in many of its major overseas

markets, and partly to improved external competitiveness caused by

the depreciation of the Hong Kong dollar against most major

currencies, in line with the depreciation of the US dollar under the

Linked exchange rate system. For the first nine months of 1986

re-exports grew by about 5% in real terms.

43.

The strong recovery in domestic exports has helped to

maintain employment at a high level and to boost labour incomes. In

the third quarter of 1986, the seasonally-adjusted unemployment rate

was 2.8% and the underemployment rate was 1.3%. Employment

continued to grow particularly in the financial and other business

services sectors and in the distributive trades. Earnings in most

sectors increased significantly both in money

terms and in real

terms.

44.

conditions,

private

In line with the improved economic

consumption demand has also firmed up, as reflected by the

relatively high growth rates of retained imports of consumer goods

and of foodstuffs, at 9% and 11% respectively in real terms in the

first nine months of 1986.

45.

Except for one or two temporary aberrations the exchange rate of the Hong Kong dollar against the US dollar has remained stable. around the linked rate of HK$7.80 to US$1 during the year. However,

reflecting the depreciation of the US dollar, the effective exchange rate index of the Hong Kong dollar fell from 70.6 in end-December

1985 to

in end-December 1986.