ENG-2008 — Page 90

50 The Economy

financial tsunami. While total exports to the European Union (EU) turned in a moderate increase in 2008 overall, there was a marked deterioration in the final quarter of the year as many of the constituent EU economies slipped into recession and the euro weakened from the middle of 2008.

Many emerging economies in Asia held up well in the first half of 2008, so did Hong Kong's total exports to the Asian markets generally. However, economic conditions in Asia worsened rapidly in the latter part of the year. The renewed strength of the US dollar from the middle of 2008 did not bode well for the competitiveness of Hong Kong's exports either. Total exports to the Mainland, the largest market for Hong Kong's total exports of goods, registered a much slower growth in the second half of 2008 as compared to the double-digit growth in the first half, as the contraction in demand from the advanced economies began to weigh on the intra-regional trade in Asia. Exports to other Asian markets such as South Korea, Singapore and Taiwan showed a similar pattern. Exports to other emerging economies in the region also recorded notable slackening after their earlier

surges.

Imports of goods recorded a much tamed growth of 2.6 per cent in real terms in 2008, after the strong increase of 10.4 per cent in 2007. Among total imports, those classified as retained imports (i.e. imports for domestic uses) showed little change in real terms in 2008, which however represented a distinct deceleration from the 11.7 per cent increase in 2007. Analysed by end-use, retained imports of raw materials and semi-manufactures posted a substantial decrease in 2008, particularly in the second half of the year when the global trade flows were severely dampened by the synchronised economic downturn. While retained imports of foodstuffs, consumer goods and capital goods all grew further in 2008 as a whole, there were declines in retained imports of consumer goods and capital goods in the fourth quarter amid worsening consumer and business sentiments. Retained imports of fuels posted a small decline in 2008 as a whole.

Exports of services fared relatively better than exports of goods, though likewise they slowed over the course of 2008. For 2008 as a whole, exports of services grew by 5.6 per cent in real terms, following a surge of 14.1 per cent in 2007. The rate of expansion in the first half of the year remained notable, yet the deceleration was steep in the second half along with the abrupt escalation of the global financial crisis and the much subdued intra-regional trade flows towards the end of the year. As fund-raising activities and trading volume in the local stock market shrank in 2008, particularly after the intensification of the financial crisis in September, exports of financial services slowed distinctly during the year. Inbound tourism also turned in a much slower growth in the fourth quarter of 2008 as the global economic slowdown weighed on the demand for travel. The slowdown in inbound tourism also had a spill-over effect on exports of transportation services. While merchanting and other trade-related services (mainly offshore trade) still held up rather well during most of 2008, there was a conspicuous deterioration in the fourth quarter as the flows of goods trade in the Asian region shrank in the final months of the year.

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