HK set for 5.5pc increase this year
GDP HONG KONG appeared to have established a pattern for the 1990s of steady, sustainable economic growth, Sir Hamish said, predicting a 5.5 per cent increase in gross domestic product (GDP) this year, unchanged from 1994.
Sir Hamish said Hong Kong's record over the past 25 years of continuous GDP growth did not mean it could be complacent.
'We have to earn our profits and our incomes the hard way, by trading successfully year in and year out,' he said, warning the territory had to maintain perspective, particularly with regard to China.
'In relation to China, in particular, so important to our own economy, we must avoid being sucked into the lemming rush from overdone euphoria to undue pessimism.' Sir Hamish forecast GDP per head would rise to more than US$24,000 from last year's figure of US$21,800.
Total exports would rise by 13 per cent, he said, with domestic exports increasing by two per cent and re-exports by 16 per cent.
'We appear to have established a pattern for the 1990s of steady, sustainable growth, one which is high by the standards of other advanced economies,' Sir Hamish said.
'Although overall growth in 1995 looks like being similar to that in 1994, it is of course true that, as always, we must be prepared to respond at short notice to shocks and reverses in world trading conditions.' However, one of the least encouraging forecasts for 1995 was that inflation would remain relatively high at 8.5 per cent, he said.
Although the year had not started on a very optimistic note, Hong Kong was fortunate that world economic prospects were looking better than they had in several years.
He expected regional GDP growth of more than seven per cent to be the fastest in the world and predicted total world trade would rise by about eight per cent.
Sir Hamish said he was optimistic about the prospect of breaking down restrictive trade barriers, but questioned whether there could be a meaningful World Trade Organisation (WTO) without China.
'It is disturbing that China and the United States find it so difficult to resolve their trade disputes through negotiation,' he said.
'Certainly, there are important principles at stake; we all have a real interest, for example, in the protection of intellectual property rights.
'But hopefully the chances of resolving trade disputes through negotiation would be considerably increased by the inclusion of China in the WTO.' Sir Hamish emphasised the stability of the Hong Kong dollar peg to the US dollar, warning speculators that they should not waste more money 'in fruitless speculation' against the peg.
The recent mid-January attack on Asian currencies was an unpleasant and unexpected reminder of how interdependent the world economy had become, he said.
'Events in Mexico had an adverse impact on world financial markets, and even caused some ripples for our own currency.
'Thanks to a prompt and skilful response from the Hong Kong Monetary Authority, we saw off the speculators.' The meltdown of the Mexican peso panicked investors into selling Asian currencies, including the Hong Kong dollar, triggering fears on January 12 that the local unit would crack the official $7.80 peg.
He welcomed the consensus among regional central bankers 'on the need for co-operation and co-ordination to roll back speculation against Asian currencies'.
'Can there be anyone left who seriously questions the importance to Hong Kong's stability and prosperity of the linked exchange rate, firmly supported by our substantial reserves? 'Just in case there are any surviving sceptics, let me save them further losses from future fruitless speculation. The linked exchange rate is here to stay. And it is here to stay at the level it is today.'