Hong Kong GDP To Grow 6.8% In 2000

Mary Swire, Tax-news.com, Hong Kong

06 April 2000

HSBC's economic research team has raised its GDP growth forecast for Hong Kong to 6.8 per cent from its previous estimate of 5.3%. The Government's current estimate is 5 per cent, although in his Budget speech, Financial Secretary Donald Tsang Yam-kuen said that GDP was thought to have grown at an annual rate of 8.7 per cent in the last quarter of 1999.

HSBC economic adviser George Leung Siu-kei said improving consumer sentiment plus the robust trade performance already this year were encouraging signs for economic growth: "Even taking account of the low base effect, it is still dramatic growth. We don't expect any significant slowdown in the second quarter."

Exports rose 17 per cent in the first two months of the year, and retained imports were also notably higher, probably suggesting that retailers were rebuilding inventories in anticipation of rising demand.

HSBC expects the US Federal Reserve to raise interest rates by 50-75 basis points in the second half of 2000. The Hong Kong Monetary Authority is almost certain to follow the Fed, so that Hong Kong's nominal rate would then be pushed to about 9.5%, with real interest rates remaining in the 11-12% region. Mr Leung said that growth in the second half would slip as a result, and also because it would be measured against the stronger second half of 1999.

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