ENG-2004 — Page 84

54 The Economy

With the increase in value of imports of goods exceeding that of total exports of goods, the visible trade deficit reckoned on a GDP basis widened in absolute terms, to $72.5 billion or 3.5 per cent of the value of imports of goods in 2004, from $45.0 billion or 2.5 per cent in 2003.

On invisible trade, exports of services sustained strong growth momentum in 2004, with the setback caused by SARS now well behind. For 2004 as a whole, there was a 15 per cent leap in real terms, much faster than the 8.1 per cent increase in 2003. The pick-up in exports of services was across-the-board, marked by highly distinct growth throughout the four quarters of 2004. The pace of the upturn was remarkable, even after allowing for the distortion caused by SARS in the second quarter of 2003.

The robustness of exports of services in 2004 was due in large part to the further surge in trade-related services, the largest component within exports of services. The region-wide trade boom, and more importantly, surging trade flows involving the Mainland, underpinned the fast growth in offshore trade. Exports of transportation services also picked up strongly, as passenger services were buoyed by a strong influx of incoming visitors, while cargo services thrived upon the lively external trade. Exports of travel services rebounded strongly, with record-breaking numbers of visitor arrivals during the year. Not only did the number of visitors from the Mainland jump to a record-high in the year, those from most other sources also surpassed the pre- SARS levels well before the year-end. Meanwhile, exports of finance, business and other services posted a notable growth along with the increase in business activities.

Imports of services reverted to a substantial 10.7 per cent leap in real terms in 2004, after the setback caused by SARS led to a 2.1 per cent decline in 2003. As with exports of services, imports of services had a quarterly profile distorted by the SARS. outbreak in 2003, with a much magnified increase attained in the second quarter of 2004 but still solid increases in the other three quarters. Imports of travel services, the largest component within imports of services, rose distinctly in 2004 after the plunge in 2003. Imports of transportation services also benefited from the rebound in residents' spending abroad, boosted further by a sharp rise in incoming cargoes. Imports of trade-related services had another year of distinct growth on the back of soaring offshore trade. Imports of finance, business and other services also strengthened amid the activity upturn.

As exports of services rose faster than imports of services, the invisible trade surplus reckoned on a GDP basis expanded further to $185 billion or 79.7 per cent of the value of imports of services in 2004, from $153.4 billion or 76 per cent in 2003. This more than offset the enlarged visible trade deficit to yield a combined surplus of $112.5 billion in 2004, equivalent to 4.8 per cent of the total value of imports of goods and services in that year, as compared with $108.4 billion or 5.4 per cent in 2003 (Chart 8).