HK's economic revival to focus on alleviating deflation

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Last updated at: (Beijing Time) Wednesday, January 07, 2004

HK's economic revival to focus on alleviating deflation

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Hong Kong Special Administrative Region Chief Executive Tung Chee Hwa said in his Policy Address for 2004 that in implementing Hong Kong's economic revival, the government need to focus on two problems: deflation and fiscal deficit.

He said that although prices, asset values and rents have been falling for more than five years, deflation is gradually easing off following government measures to stabilize the property market, attract tourists and stimulate consumption. This has boosted local consumption and investment.

Tung said he believed that deflation, which has persisted for more than five years, will disappear in 12 to 18 months.

He said following the downward adjustment over the past few years, asset and labor prices in Hong Kong have become more competitive. This has laid a solid foundation for economic revival.

In reducing the deficit, the public has paid a price and Hong Kong's civil servants have made their commitments.

He said due to the SARS (Severe Acute Respiratory Syndrome) outbreak, government spending has increased. The Financial Secretary has postponed the target date for restoring fiscal balance to 2008/2009 fiscal year.

Tung said the ways to eliminate the fiscal deficit are to increase taxes and fees, cut expenditure and promote economic growth. Now that Hong Kong is beginning to see signs of an economic recovery, "we will strive to ensure sustained growth and to reduce deflation."

He said his government will seek to strike a careful balance between reducing the fiscal deficit and safeguarding people's livelihood, and give the community adequate time to recover.

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