ENG-2017 — Page 74

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The Economy

Total exports of goods grew briskly in 2017, picking up from the modest growth in 2016. The strengthening global demand gave rise to vibrant regional production and trading activities in Asia. Against this backdrop, exports to Asian markets continued to be the key propeller in 2017. Exports to the United States and European Union also reverted to growth for the year as a whole.

Exports of services likewise saw a broad-based turnaround, reverting to moderate growth from the annual decline in 2016, thanks to vibrant regional trade flows, a solid revival of inbound tourism and increasingly buoyant global financial markets.

Domestically, private consumption expenditure continued to display strength, with growth gathering pace over the course of 2017. The stellar private consumption performance was underpinned by favourable job and income situations as well as a bigger boost from positive wealth effects. Investment expenditure resumed a moderate increase for 2017 as a whole after three years of annual decline, aided by generally optimistic business sentiment and an acceleration in public-sector building and construction works.

The labour market tightened in 2017 on the back of a vibrant economy. Both unemployment and underemployment rates averaged at their respective post-1997 lows, of 3.1 per cent and 1.2 per cent, for the year as a whole. Benefiting from the broad-based tightening of the labour market, wages and earnings growth across most of the major sectors continued to be well above inflation.

The residential property market was generally buoyant in 2017, except for a temporary moderation around the middle of the year following the introduction of the eighth round of macro-prudential measures for property mortgage loans by the Hong Kong Monetary Authority (HKMA) in May. Improved global and local economic performance, the still-tight demand- supply balance of flats and sustained low local interest rates all contributed to the fervent market situation. Trading turned more active again in the latter part of 2017 and overall flat prices recorded a hefty gain of 15 per cent during the year.

The local stock market saw a strong rally, as investor sentiment turned more bullish amid the brightened global economic outlook and receding external risks. The Hang Seng Index rose almost uninterruptedly, reaching a post-crisis high of 30,003 on 22 November before closing the year at 29,919, 36 per cent higher than at end-2016.

Inflation remained moderate as local cost pressure was largely contained and imported inflation stayed low. The underlying inflation rate dropped to 1.7 per cent in 2017 from 2.3 per cent in 2016, marking the sixth consecutive year of easing.

Structure and Development of the Economy

Hong Kong is a global centre for world trade, finance, business and telecommunications, located strategically at the doorstep of the Mainland's huge and vibrant economy. According to the World Trade Organisation, Hong Kong was the world's seventh largest merchandise trading entity in 2017. It operates one of the world's busiest container ports in terms of container

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