TNAG-1942-FCO40-2768-Internal-economic-situation-in-Hong-Kong-1989 — Page 55

retained imports were adjusted downwards from

15.5% to 13%, and from 9.5% to 8.5%. Taken

together, these changes have not altered the

forecast growth rate of GDP for 1989, at 6% (see

details in the attached table).

14.

The performance of domestic exports in

the first quarter had not been as good as

initially expected.

Although the latest orders

position and the recent increases in retained

imports of raw materials and semi-manufactures

suggest that the performance of domestic exports

could be better in the second quarter, the

slow-down in economic growth in Hong Kong's major overseas markets, particularly the United States and the Federal Republic of Germany, seem likely to restrain their demand for Hong Kong's products in the second half of the year.

Moreover, the strengthening of the US dollar

since the beginning of the year could be

expected to affect the price competitiveness of

Hong Kong's products adversely in some markets.

Domestic exports to China are likely to be restrained by China's austerity measures as well as by a possible slow-down in the expansion of outward processing activities, in line with the

slower growth in overseas demand for Hong Kong's