HK's Economic Growth is Expected to Hit 7.8%

In the latest edition of The Quarterly Journal of HK &Macao Economy published by Bank of China group, an article points out that strong growth in the first half of this year plus favorable external environment and internal factors in the second half of this year will push HK's economic growth rate onto 7.8%, evidently higher than the projection made at the beginning of this year.

The biggest characteristic of HK economy in the fist half year is that good economic performance does not coexist with obvious improvement of well being of common people. The former is displayed by accelerating growth of two-digit growth rate. The partial recovery has turned into full pickup with restoration of investment rise pulling up all the major components of GDP. The reasons for strong economic development derive form the global economic improvement giving impetus to export of HK's products and services and the boom of high-tech stocks and resulting equipment investment expansion. However, this growth is not felt by common people for three reasons:

First is the actual growth rate eliminating the factor of price drop is still mild, second is entrepreneurs narrow the price differences between import and export , between production and sales in order to maintain competitiveness, the resulting narrowing profit rates make them cautious in recruiting employees and determining wage rate; the third reason is that the development of innovative technology can not compensate for the negative influence of too fast decline of real estate industry on the economy.

When looking ahead at the prospect of HK economy, this paper argues that the biggest influencing factors are economy and interest rates of US. It estimates that US may probably raise interest rate by 0.25% to 0.5% once again and US economy will slightly slow down but remain a sustainable growth rate not stimulating inflation; The momentum of global economic rise will remain unchanged while the gap between US and Japan, EU will be narrowed thus balancing the economic development of industrial nations. Some important changes have emerged in first half year's Chinese economy, in addition to new impetus of entry into WTO in the second half year, China's economy will enter new growth cycle. Other Asian economies will continue their recovery after pickup of export to US, besides, US exchange rate is expected to go down , it is anticipated that HK export will maintain growth in the second half of year and continue to become the main driving force of economic development.

The internal economic activity of HK in the second half-year is largely dependent on interest rate, stock market and real estate market trend. The internal demand of second half-year will continue the full recovery.

The article notes that with the gradual revelation of economic recovery 's pulling up of employment , unemployment rate will keep on declining to lower than 4.5% of the fourth quarter, annual private consumption will increase by 4.%%, higher than original projection. Under the effect of slight rise of import price and the pickup of investment of investment , the deflation will be rectified in the second half year and is expected to stop decline by the fourth quarter. The article predictes that the recovery of the whole year is strong and will gradually benefit the common residents.





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