TNAG-1641-FCO40-2288-Budget-of-Hong-Kong-1987 — Page 152

11.2.87

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3.

Although we are now in a much sounder position,

the lessons we have learned remain valid. Hong Kong is as

vulnerable as ever to external forces. It is inevitable

that we will experience volatility in our economic

performance. Whilst the economy has improved in 1986,

perhaps beyond our expectations, there are, as usual, some

clouds on the horizon. Protectionism still remains a

worrying threat. I have no doubt that in managing our

public finances we should not take action that is likely

to aggravate the volatility in our economy. We must at

all times pay careful attention to the underlying trends,

and ensure that our budgetary management is characterized

by stability.

4.

As far as possible I intend to adhere to the

policies that we have successfully followed in the past.

In particular, I see no place for deficit financing as a

permanent feature of fiscal policy, although I recognize

that on occasions it may be inevitable that deficits have

to be faced. They will also have to be dealt with so that

we return to balance without undue delay. It is much

easier to slide into deficit than to recover from that

unhappy state, and accordingly, a cautious approach is

needed even when we appear to be riding on the crest.

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