ENG-2006 — Page 67

Chapter 3

The Economy

Hong Kong's economy continued to surge on a broad front in 2006, chalking up an average annual 7.7 per cent growth in the past three years, the fastest sustained pace in two decades.

The impressive performance is attributed largely to a hardworking, highly adaptable workforce, world-class entrepreneurship and the guiding principle of 'market leads, government facilitates'.

The Hong Kong economy continued to expand at a brisk pace in 2006. The Gross Domestic Product (GDP) leaped by 6.9 per cent in real terms, following a robust 7.5 per cent growth in 2005. After a strong 8.1 per cent expansion in the first quarter of 2006, the economy moderated to a 5.6 per cent growth in the second quarter, but soon regained momentum to a 6.8 per cent growth in the third quarter as trade showed renewed vigour. Growth in the fourth quarter remained well above- trend at 7.3 per cent. The financial services sector did very well in 2006, so did the trading and logistics sectors. Hong Kong's economy has become more dynamic and continued to move up the value chain during the year. On a seasonally adjusted quarter-to-quarter comparison, real GDP expanded strongly during the year, by 2.0 per cent, 0.9 per cent, 2.6 per cent and 1.5 per cent respectively in the four quarters.

The robust economic growth attained over the past three years, at an annual average of 7.7 per cent, together with a moderate inflation rate, is a clear indication of sound economic fundamentals, thanks to a highly flexible workforce and excellent entrepreneurship, and also to Hong Kong's pro-market economic policy under the guiding principle of 'Market leads, Government facilitates'. In December 2006, the Executive Broad of the International Monetary Fund (IMF) concluded its annual Article IV Consultation discussions with Hong Kong. The Broad attributed Hong Kong's sustained economic expansion to its skilful macroeconomic management, flexible markets and highly developed financial infrastructure.

The external sector put up a robust performance in 2006, both in goods and services. Boosted by the generally resilient global economy, the Mainland's robust

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