ENG-1991 — Page 69

گا

THE ECONOMY

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FOLLOWING the revival in the latter part of 1990, the Hong Kong economy continued to grow steadily in 1991. The quick ending of the Gulf war early in 1991 cleared some of the uncertainties in the global economy. The renewal of China's Most Favoured Nation status in the United States was another welcome development for Hong Kong. The conclusion in July of the Sino-British Memorandum of Understanding on the implementation of the new airport and related projects further boosted local business confidence.

In the external sector, domestic exports registered a modest increase in the first half, but slackened in the second half of 1991. The generally sluggish performance of domestic exports should, however, be viewed against the substantial increase in re-exports throughout 1991. Many of these re-exports were products of outward processing arrangements made between Hong Kong companies and manufacturing entities in China. In the domestic sector, demand strengthened further in 1991 and this was particularly so for investment spending. Reflecting these developments, the gross domestic product (GDP) grew by 3.9 per cent in real terms in 1991, with increases of 3.9 per cent in the first half and four per cent in the second half. The corresponding growth rate in 1990 was three per cent.

After some easing in the first half of 1991, the labour market tightened again in the second half as the economy continued to grow steadily. In line with the development of Hong Kong into a more service-oriented economy, labour resources continued to shift from manufacturing to services. Reflecting this, employment in the manufacturing sector decreased, while employment in the service sectors showed a further increase in 1991. Average earnings in various major sectors, as measured by payroll per person engaged, showed further significant increases in money terms in 1991, albeit at a more moderate rate than in 1990.

The rate of consumer price inflation was still high during 1991. There was, however, a gradual moderation of the inflationary pressures since April. The package of counter- inflation measures adopted by the government in May helped to dampen inflationary expectations in the economy. A temporary increase in the prices of some essential foodstuffs lifted consumer price inflation in July and August, but as these prices stabilised the trend of moderation continued. On a year-on-year comparison, the Consumer Price Index (A) rose by 12.5 per cent in the first half and 11.6 per cent in the second half of 1991. For 1991 as a whole, the Index was on average 12 per cent higher than in 1990. The corresponding rate of increase was 10.1 per cent in 1989 and 9.8 per cent in 1990.

Statistical data are given at Appendices 7-11.