IMF raises HK GDP growth forecast to 6.75%

16:42, November 18, 2010      

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International Monetary Fund (IMF) Mission Chief for Hong Kong on Thursday raised the forecast for Hong Kong's economic growth to 6.75 percent in 2010 and maintained IMF's support for the Linked Exchange Rate System.

With the Hong Kong Special Administrative Region (HKSAR) government's prompt policy action in response to the global financial crisis, the IMF sees the Hong Kong economy as now back on a robust growth trajectory, with the key sources of demand firing on all cylinders.

IMF projects that Hong Kong's economy will expand 6.75 percent in 2010 before moderating to 5 to 5.5 percent in 2011, said Nigel Chalk, IMF Mission Chief for Hong Kong and Senior Advisor of the IMF's Asia and Pacific Department at a video teleconference between Washington DC and Hong Kong.

Noting Hong Kong's strong economic recovery, improving labor market and very loose monetary conditions, Chalk expected a continuation, and perhaps acceleration, of the credit-asset price cycle. And he considered it essential to guarantee financial stability in the event the cycle shifts into reverse.

Chalk said the government's graduated response to property price inflation is essential and should continue. He called for regulators to continue to ensure that underwriting standards are rigorously complied with. This would be greatly facilitated by expanding the credit reference agency's current information base to include data on all individuals' mortgage loans.

The Financial Secretary, John C Tsang, welcomed the IMF Mission's positive economic outlook for Hong Kong.

"The continued broad-based recovery of the economy demonstrates that Hong Kong has weathered the global financial storm well. Nonetheless, we will remain vigilant and continue to deal with the challenges created by the exceptionally accommodative monetary policies in the developed economies," he said.

The IMF maintains its support of the LERS, which has proven to be a robust anchor of Hong Kong's monetary and financial stability, even in very difficult circumstances, said Chalk.

The Chief Executive of the Hong Kong Monetary Authority, Norman Chan, said, "We are grateful to the IMF Mission for its continued support of the LERS. We are also pleased with the Mission's reconfirmation of the robustness of Hong Kong's banking system. Moreover, we are fully aware of the risks of an acceleration of the credit-fueled asset cycle. We will monitor developments closely and introduce appropriate and timely prudential supervisory measures to ensure banking stability."

Chalk also considered that Hong Kong's unique position as an international financial center, with strong links to the Chinese mainland, provides significant potential for growth and development.

Specifically, the Chief Mission suggested that Hong Kong should seek opportunities to further develop offshore renminbi business in Hong Kong. These efforts should focus on increasing the use of the renminbi as a settlement currency for trade and current account transactions and expanding the range of investment vehicles into which offshore renminbi can be invested, said Chalk.



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