ENG-2001 — Page 92

THE ECONOMY

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On invisible trade, exports of services similarly slowed, but still recorded a modest increase of 3.5 per cent in real terms in 2001. While this was also markedly down from the double-digit growth of 14.1 per cent in 2000, exports of services had generally held up better than exports of goods during the year. Amidst the slump in global trade, there was a setback in both regional business demand and exports of transportation services. The fall-off in inbound tourism after the September 11 incidents exacerbated the situation. Imports of services recorded only a marginal growth of 0.1 per cent in real terms in 2001, even slower than the 2.1 per cent rise in 2000. In tandem with the fall-off in merchandise trade, imports of trade-related services came down visibly. Imports of travel services also slackened especially in the latter part of the year, upon the impact of the terrorist attacks. As exports of services picked up slightly while imports of services were virtually flat in value, the invisible trade surplus widened further, to $156.8 billion or 87.6 per cent of the value of imports of services in 2001, from $149.3 billion or 83.2 per cent in 2000. This more than offset the enlarged visible trade deficit, resulting in a combined surplus (including an estimate of imports of gold for industrial use) of $67.1 billion in 2001, or 3.8 per cent of the total value of imports of goods and services, up from $60.6 billion or 3.3 per cent in 2000.

Domestic Demand

Local consumer spending held up quite well in the first half of 2001, upon increased household income on the back of a robust economic performance in 2000. Yet faced with the worsening global economic conditions, local consumer spending eased off thereafter. Then upon the impact of the September 11 incidents in the United States, local consumer spending moderated even more, while inbound tourism was severely hit. Reflecting these adversities, private consumption expenditure (PCE) grew by only 2.0 per cent in real terms in 2001, considerably slower than the 5.4 per cent increase in 2000. Moreover, the year-on-year growth rate, though still notable at 3.0 per cent and 3.5 per cent respectively in real terms in the first two quarters of 2001, slowed distinctly to 1.2 per cent and 0.3 per cent in the third and fourth quarters. On a seasonally adjusted quarter-to-quarter comparison, PCE went up by 2.3 per cent in real terms in the first quarter of 2001 and then by 0.5 per cent in the second quarter, before falling by 1.0 per cent and 0.8 per cent respectively in the third and fourth quarters.

Government consumption expenditure (GCE) reckoned on a national accounts basis, having risen by 3.9 per cent and 4.1 per cent respectively in real terms in the first and second quarters of 2001 over a year earlier, showed larger increases by 6.2 per cent and 6.1 per cent in the third and fourth quarters. For 2001 as a whole, the growth averaging at 5.1 per cent in real terms was distinctly faster than that in 2000 at 2.1 per cent. This pick-up was partly associated with the payments made for voluntary retirement of civil servants. On a seasonally adjusted quarter-to-quarter comparison, GCE went up visibly by 5.4 per cent in real terms in the first quarter of 2001, but fell back by 1.7 per cent in the second quarter, before increasing modestly by 2.0 per cent and 0.4 per cent respectively in the third and fourth quarters.

Overall investment spending, as represented by gross domestic fixed capital formation (GDFCF), recorded a modest growth of 2.1 per cent in real terms in 2001, following a 9.8 per cent leap in 2000. Continuing the upsurge in 2000, GDFCF sustained a double-digit growth at 11.5 per cent in real terms in the first quarter of