ENG-1993 — Page 74

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THE ECONOMY

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THE Hong Kong economy maintained a steady growth in 1993. The gross domestic product (GDP) grew by 5.5 per cent in real terms, with increases of 5.4 per cent in the first half of the year and 5.6 per cent in the second half. The corresponding growth rate in 1992 was 5.3 per cent.

Locally, consumer spending continued to register solid increases.

Investment in building and construction strengthened, supported by the acceleration in activity in the public sector.

However, investment in machinery and equipment consolidated, following the large increases in the previous years.

Externally, re-exports continued to perform strongly. The growth rate was, however, less rapid in the fourth quarter, affected by the slack demand in the major overseas markets. Many of these re-exports were products of outward processing arrangements involving Hong Kong companies and manufacturing entities in China. Domestic exports, after showing virtually no change in the first quarter, slackened further in the ensuing three quarters.

In line with the steady economic growth, the labour market tightened slightly in the second half after a temporary easing earlier in the year. The seasonally adjusted unemployment rate was 2.3 per cent in the first half of 1993, while in the second half it was two per cent. Labour resources continued to shift from manufacturing to the services sector, induced by the on-going structural transformation of Hong Kong into a more service-oriented economy. Average earnings in the major sectors showed further significant increases.

Apart from temporary relapses in some months due to volatile movements in the prices of certain essential foodstuffs, consumer price inflation was generally on a moderating trend during 1993. The inflationary pressures were largely generated domestically, rather than imported.

The rate of increase in the Consumer Price Index (A) for the year as a whole was 8.5 per cent, appreciably lower than the 12 per cent recorded in 1991 and 9.4 per cent recorded in 1992.

The GDP deflator, as a broad measure of overall inflation in the economy, also moderated, from 10.1 per cent in 1992 to 7.8 per cent in 1993. The rate of increase in the domestic demand deflator was consistently lower than that in the GDP deflator, and it decelerated from 6.6 per cent in 1992 to 5.7 per cent in 1993.