Asian Development Bank Forecasts Two-Year Outlook For Hong Kong Economy

by Mary Swire, Tax-news.com, Hong Kong

23 April 2001

The Asian Development Bank (ADB) has released its annual economic outlook report on Hong Kong with the prediction that the jurisdiction's economy is set to grow by 4 per cent this year and 5.5 per cent during the following year. According to the report, this is due to increased government spending and significant private investment. It stated: 'Gross fixed investment will probably accelerate more rapidly in the next two years.'

Last year saw the highest growth in ten years for the Hong Kong economy at 10.5 per cent but the slow-down of the US economy has led economists to be less optimistic with their future predictions. News reports from Hong Kong state that economists from ABN Amro have reduced their forecast to 1.5 per cent from 3.5 per cent, HSBC to 2.2 per cent from 3.4 per cent and Deutsche Bank has also cuts its forecast to 3.2 per cent from 4.2 per cent.

According to the ADB, Hong Kong, China, Singapore and Taiwan will experience the most acute slow-down in Asia due to their heavy reliance on technology exports and the US market. It is expected that Hong Kong's exports growth will slow down to around 5.3 per cent this year and 8.5 per cent next year. The report explained: 'Improvements in the external sector should continue, though at a slower rate, as growth of neighbouring economies remains solid.'

In addition the combination of the US interest rate cut, increasing globalisation and technological demands is likely to result in the drop of real interest rates. The ADB said: 'The dismantling of entry barriers to markets, the availability of low-cost, high-speed transport, and advances in information and communications technology have challenged the effectiveness of domestic market regulations.'

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