IMF Lauds Hong Kong Economic PerformanceAn International Monetary Fund (IMF) staff mission to Hong Kong affirmed that Hong Kong's economy has recovered strongly.The mission was upbeat about the performance of the Hong Kong economy this year and forecast a 9.5 percent GDP growth for 2000, based on strong external demand. Growth is projected to moderate to 4 percent in 2001, reflecting partly the dissipation of the low-base effect and partly the relatively modest growth in consumption and weak investment. Nevertheless, external demand is projected to remain strong next year, especially in light of the better prospects for China. The mission said the prolonged decline in domestic prices may now be coming to an end, and projects a return to 1 percent inflation next year. The assessment was made by the IMF mission in their Concluding Statement following the annual Article IV Consultation with China in respect of Hong Kong SAR, which involves a review of Hong Kong's exchange rate, fiscal and economic policies. The mission considered that the greatest challenge facing Hong Kong is adjusting to the mainland's prospective entry into the World Trade Organization. A key task for Hong Kong is to ensure that the economy builds on its current advantages, including flexible markets, a more competitive cost structure and strong legal and regulatory institutions. Ranjit Teja, division chief of the Asia & Pacific Department of the IMF, who was leading the mission, said, "We are optimistic that these challenges will be met." The mission is supportive of the existing monetary and financial policy framework, including the linked exchange rate regime, the fiscal policy and the financial supervisory framework. The mission noted that Hong Kong's prudent bank practice, strong legal institutions, and effective supervision had enabled the banking system to weather the turbulence of the Asian crisis. The mission also supported the upgrading of the securities regulation and financial infrastructure, including the recent merger of the exchanges and clearing houses, the proposed introduction of deposit insurance and the move to more risk-based supervision of banks. It commended the authorities' recent efforts to raise corporate transparency and catalyze the establishment of a commercial credit reference agency. Stephen Ip, acting financial secretary of Hong Kong, said, "We welcome the IMF mission's assessment of the Hong Kong economy and endorsement of our monetary and fiscal policy framework." "Hong Kong is committed to promoting competition in the local markets. An all-embracing competition legislation could have profound implications for our market efficiency and flexibility, particularly given that Hong Kong is a small and open economy," Ip said. The IMF mission was in Hong Kong from October 23 to November 3 for the annual Article IV Consultation visit on the Hong Kong SAR. It held discussions with the private sector and government officials. |
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