IMF Cuts SAR Growth Forecast

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

27 February 2003

The International Monetary Fund (IMF) has cut its growth forecast for this year from 3.4% to 3%, according to a report from the Hong Kong Standard on Wednesday.

The IMF announced recently that: 'Moderate economic growth is likely to continue in the near term, but this is predicated on external demand conditions,' and warned that deflation, a weak property market, and high unemployment will continue to restrain domestic demand. International political and economic uncertainty could also take their toll on the SAR's growth prospects.

Addressing an issue currently high on the Hong Kong government's own agenda, the IMF observed that: 'A well-specified deficit reduction plan will be essential to bolster market confidence in Hong Kong's macroeconomic policies,' adding that: 'The authorities will need to develop additional revenue sources that are broad-based and stable in order to make progress towards the medium-term fiscal objective.'

Representing a possible step in the right direction, it was reported earlier this week that the Federation of Hong Kong Industries, the Hong Kong Chamber of Commerce, and the Hong Kong Chinese Manufacturers' Association have all approved a 1% increase in corporate profits tax for introduction on March 5.

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