TNAG-1483-FCO40-2037-Economic-situation-in-Hong-Kong-1986 — Page 176

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conservative.

The

revised forecast growth rate is

Government consumption expenditure is expected

6.5%.

to grow by

4%,

somewhat higher than the budget

forecast of 2% but still below the expected growth

rate of GDP. It remains the Government's policy to

keep public expenditure under control.

25.

Judging by the fact that retained imports of

investment in plant and

capital goods fell by 6%,

machinery remained weak in the first half of the

year. I now expect overall investment in plant and

machinery to show no change this year, compared with

the budget forecast

investment in plant and machinery fell in 1985, this

has been identified by some as a cause for concern

But this concern

of a growth of 2%. Given that

y

about Hong Kong's economic future.

is exaggerated.

Let me explain.

26.

The

determinants of investment expenditure

are complex with many factors being relevant, but I

would like to draw your attention to some pointers

which seem to me to be significant.

The small fall in

private plant and machinery investment in 1985

followed a rise of almost 23% in 1984. To put recent

events in perspective, 1984 saw the highest ever level

of private investment in plant and machinery in Hong

Kong, and 1984 and 1985 taken together

taken together represent the

best two consecutive years ever.

/27. Unfortunately