remain
some
strong relative to
supply (8). This, plus the lagged
effect of increased import prices, may give rise to additional inflationary pressures. The average rate of increase
in consumer prices is forecast to be about 6%, which is higher
than the corresponding rate of 3.7% in 1986 (9). The forecast
rate of increase in the GDP deflator is about 5.5%.
22.
The forecast growth rate of GDP in money terms is about
12% in 1987, implying a current price GDP of about
$330 billion. At current prices, per capita GDP in 1987 should
thus be about $58,000, equivalent to US$7,400.
MONETARY ISSUES
23.
The better than
I turn now to monetary issues. expected performance of the economy in 1986, and the lower and
declining interest
interest rates over the year have led to a general
improvement in
in asset prices, most notably those of financial
assets. The stock market, for example, has performed strongly,
helped by the inflow of foreign investment funds into Hong Kong to take advantage of the potential returns available here.
24.
I am happy to report that the exchange rate has
continued to demonstrate remarkable stability, remaining for
most of the time within a narrow range against the US dollar.
There was, nevertheless, spasmodic
based speculation
unfounded rumours of a possible change in the link.
25.
on
Although such speculative activity was short lived, I reiterate that the Government has no intention of tampering with
the link. The linked exchange rate system is a crucial element
underlying the stability of our monetary system, and the
The forecast growth rate of total final demand (excluding re-exports), at 7.3%, is higher than that of GDP at 6.2%.
(8)
(9)
These increases refer to the private consumption expenditure deflator.
/stability
7
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